Asia Base Oil Price Report


Spring has arrived, and with it healthy demand and tightening spot supply within the Asian base oils market. Thats no surprise since this is the busiest season for lubricant production.

Availability of light-viscosity grades is still described as snug, but bright stock supplies have also dwindled due to strong demand plus upcoming maintenance turnarounds for several API Group I plant in the region.

While some suppliers base stock inventories are lean because their plants are now undergoing maintenance, others are building inventories to cover contractual obligations during scheduled shutdowns.

Because of the tightening conditions, suppliers increased bright stock price indications, with numbers edging up by at least U.S. $20 to $30 per metric ton – slightly more in some cases – over the past couple months.

In Southeast Asia, bright stock supply was said to have tightened in the weeks leading up to a turnaround at Thailands Integrated Refinery & Petrochemicals Complex plant in Rayong, which started in mid-March, according to sources. The plant has the capacity to produce 320,000 tons per year of Group I oils.

In Japan, JX Nippon Oil and Energy is scheduled to start an extensive turnaround at its 250,000 t/y Group I unit in Mizushima in May. Japanese base oil buyers were not expecting product shortages as the producer has built inventories to cover the dropoff in output, and many consumers have also padded their stocks.

In another development, Japanese base stock consumers hurried to conclude purchases before the an April 1 increase in the national sales tax -from 5 percent to 8 percent. Suppliers expected declines in requirements for April, May and June.

Price offerings for regional exports to Japan rose $20-30/ton in April because of firm feedstock prices. Sources said that consumers had no choice but to accept the increases given the need to secure product. Japanese lubricant producers also complained that it has been difficult to pass on higher raw material costs to finished products.

Demand for light grades had been stronger than for their heavy stocks during the past three months. This and decreased supply had allowed suppliers to rise $10-20/ton since January.

Achieving price increases on the heavy grades has been more difficult, suppliers admitted, as availability has been plentiful, but demand has picked up, and supplies are expected to tighten. Some producers have raised price offerings $20-30/ton for April and May shipments.

A Taiwanese Group I supplier said it was sold out of April heavy-vis cargoes and is currently negotiating May shipments. The market situation next month is expected to be similar, and the producer expects to have little surplus after May volumes have been finalized.

In China, supplies of light grades are still described as tight, but the heavy-vis oils are also drawing strong buying appetite. While light Group II oils had been expected to be more plentiful after the November start-up of the new 400,000 t/y Panjin Northern Asphalt unit in Liaoning, sources said the plant was closed for 20 days to specification issues

At least two other plants remain shut in China: Sinopecs 300,000 t/y Group II unit in Gaoqiao, which was taken offline for maintenance from mid-February until mid-April; and Sinopecs 100,000 t/y Jingmen Group II plant, which has been closed since January but is likely restart this month.

Sinopecs Jinan 150,000 t/y Group II plant was also expected to restart in April, following a shutdown that commenced in January.

Market activity was winding down ahead of national holidays such as the Qing Ming Jie holiday in China, the Childrens Day/Tomb Sweeping holiday in Taiwan and Chakri Day in Thailand.

In terms of prices, numbers were largely unchanged on an ex-tank Singapore basis, but some products underwent revisions on an FOB Asia basis.

On an ex-tank Singapore basis, prices were assessed at $1,040-$1,090/t for Group I solvent neutral 150. The SN500 grade was heard at $1,060-$1,120/t, while bright stock was reported at $1,170-$1,240/t.

On an FOB Asia basis, Group I solvent neutral 150 was holding at $950-$980/t FOB Asia. SN500 was reported at $1,030-$1,070/t, although a majority of deals were said to be taking place near the high end of the range. Bright stock prices moved up to $1,150-$1,210/t, reflecting a $20-30/ton price hike.

Group II 150 neutral was quoted at $1,010-$1,050/t FOB Asia, while 500N was steady at $1,050-$1,100/t FOB Asia.

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

On the shipping front, several large cargoes were being quoted, with a 5,000-ton parcel expected to be shipped from Yeosu, South Korea, to Beihai, China, during April 10-25. A 4,000-ton lot of two base oil grades was being worked on for Ulsan or Yeosu to Mesaieed, Qatar, for a second-half April lifting and delivery after May 15. A 4,000-ton cargo of two grades was being discussed for shipment from Mailiao, Taiwan, to Mumbai, India, in early May. A 6,800-ton lot was on the table for Singapore to Zhapu, China, for April 16-20 lifting. Finally, a 1,750-ton parcel of bright stock was likely to cover Sriracha, Thailand, to Ulsan around April 1-10, or April 22-25.

Upstream, May ICE Brent Singapore futures were trading at $105.49 per barrel in afternoon trading April 7, compared with numbers at $107.69/bbl on March 31.

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