Asia Base Oil Price Report

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A few encouraging signs have emerged for Asian base oil suppliers, with sellers noting improved order volumes and a moderate pricing uptrend.

These conditions are typical for the month leading to the busiest time of the year for base oil and finished lubricants producers, although activity appears to be watered down compared to previous years, a few sources commented. Demand has not been as robust as anticipated, and producers continue to struggle with thin margins and strong resistance to price increases.

A couple producers noted that small increases of U.S. $10 to $20 per metric ton have been achieved on March and April base oil transactions, compared with February levels. These increases were more modest than suppliers originally proposed hikes of $20-$30/t.

However, one producer said it had negotiated March shipments at premiums of $20-$30/t over commonly accepted Northeast Asia benchmark prices.

Negotiations for April shipments are ongoing and are mostly expected to be finalized next week, a Northeast Asian producer said. The supplier did not expect to have any spot cargoes to offer for April shipment because term customers were requesting more volumes for the spring season, which traditionally runs through May.

Another supplier said it expected a market upswing for the next three months, but that the trend would be difficult to sustain as requirements start to slow down in the second half of the year and more product is likely to become available.

While a small number of plants in Asia are currently undergoing turnarounds or will be taken offline for maintenance soon, production is generally running well.

In some cases, refiners have cut back production due to high feedstock costs that are compressing margins, but this has not had a significant impact on availability, which is deemed more than adequate to cover current requirements, according to buyer sources.

Nevertheless, the low-viscosity grades in API Group I and II are deemed on the tight side, compared to their high-vis counterparts, which will see heightened demand as the warmer weather approaches, sources added.

Suppliers said they had noted a small uptick in orders for the solvent neutral 500 and 500/600 neutral grades. Prices for these cuts have inched up in recent weeks, with increases of $10-$20/t noted, but values were heard largely unchanged this week.

On the finished lubricants side, a couple sellers said prices had improved and that there was cautious optimism in the market that spring would see more vibrant activity. There were particularly optimistic prospects of demand growth in the China market as increased requirements were anticipated from the automotive and industrial segments.

Domestic availability of base stock in China is described as tighter over the past few weeks, given that a number of base oil units are still offline.

Sinopecs 300,000-ton per year Group II unit in Gaoqiao was taken offline for maintenance from mid-February until April, while the companys 100,000 t/y Jingmen Group II plant remains shut down since January and is not likely to restart until April either.

The Szechwan refinery, owned by PetroChina and a local base oil company, was also heard to be running at reduced rates of 75 percent due to feedstock supply issues, according to sources. Others said that Panjin Asphalt, which started producing base oils in November, may shut down its plant briefly to make adjustments in response to product specification issues.

Nevertheless, supply in China was anticipated to improve in coming weeks as Sinopec Jinan, a 150,000 t/y Group II plant shut down for around three months, was restarted the first week of March, market sources said. The start-up of a new 240,000 t/y Sinopec Group II unit in Beijing was also slated for this month.

In other markets, bright stock was heard to be tight in India because of delays in the delivery of European product caused by harsh winter conditions. Buying and selling ideas were said to be hovering at around $1,200-1,230/t CFR India. Bright stock was also said to be tight in other countries because unlike other Group I cuts, it is difficult to replace with Group II grades.

Other Group I prices in India were heard at $940-980/t CFR India for SN150 and at $960-$1,000/t CFR for SN500.

As far as regional spot pricing was concerned, there were few fluctuations noted in Asia during the week, with values said to be holding at unchanged levels. Group I solvent neutral 150 was assessed at $940-$970/t FOB Asia. SN500 was holding at $1,030-$1,070/t, and bright stock at $1,130-$1,180/t, all FOB Asia.

Prices for Group II material were reported at $1,000-$1,040/t FOB Asia for 150N, while 500N was heard trading at $1,050-$1,100/t FOB Asia.

In the Group III segment, 4 centiStoke and 6 cSt oils were holding at $1,030-$1,080/t FOB Asia, and the 8 cSt grade was steady at $1,020-$1,050/t FOB Asia.

On an ex-tank Singapore basis, prices were assessed at $1,020-1,060/t for Group I SN150, at $1,050-1,120/t for SN500 and at $1,170-1,230/t for bright stock.

A flurry of inquiries was floating in the shipping market, with a 3,000-ton cargo expected to be shipped from Ulsan, South Korea, to Tianjin, China, on a prompt basis. A second 5,000-ton parcel of four base oil grades was being discussed for Ulsan-Tianjin for March 15-25 lifting. Also ex-South Korea, a 3,000-ton lot of two grades was on the table for Yeosu to Chennai, India, for March shipment. A 2,500-ton parcel of four base oil grades was still on the table for Yeosu to Merak, Indonesia, during March 20-31. Three different cargoes were being quoted from Korea to mid-China, North China and South China for March lifting.

In Japan, a 5,000-ton parcel was still being quoted from Kainan to Hong Kong and Singapore for March 6-15 lifting. A second 2,000-ton lot was expected to be shipped from Mizushima to Singapore during March 13-20.

Upstream, April ICE Brent Singapore futures were trading at $108.08 per barrel in afternoon trading March 10, compared with March futures at $111.09/bbl on March 3.

Gabriela Wheeler, based in Japan, can be reached directly atGabriela@Lubesngreases.com

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