A widening gap between buyer and seller price expectations is hindering the conclusion of business in Asia, despite an uptick in demand during the week.
Sources said suppliers were trying to hold on to listed prices, while buyers were pushing for lower numbers, citing plentiful supply and their own difficulties passing on price increases.
Demand is there, but price expectations are not realistic, a supplier said, adding that bids were at least U.S. $10 to $20 per metric ton lower than spot offers.
Buyers were not eager to finalize deals as they were hoping suppliers would acquiesce to lower buyer offers.
A number of traders in China were heard to have succumbed to the pressure and have sold cargoes at a loss because they needed cash flow.
Base oil demand in China has slowed, sources said, and some players were afraid that prices will falter if conditions do not improve.
However, requirements for heavy-vis API Group I oils were holding fairly steady, a source said, with bright stock in particular seeing brisk trading action and prices hovering near $1,250-1,265/t CFR China.
Offers for solvent neutral 150 into China were heard at around $970-990/t FOB Asia and at $1,060-1,080/t for SN500 FOB, while bids were mentioned at $950-960/t FOB for SN150 and near $1,050/t FOB for SN500.
Meanwhile, in India, competition among Asian suppliers to win over Group II business has gained momentum as fewer cargoes are heard to be available for export from the United States. A tight supply-and-demand balance in that country, coupled with a number of plant turnarounds, has forced producers that regularly ship product to India to reduce their export volumes, according to sources.
However, participants lamented that price ideas in India were low and in some cases, CFR India indications were below FOB Singapore prices.
A couple South Korean Group II producers were heard to be in negotiations with Indian buyers and hoped to finalize transactions before the start of the monsoon season, as demand is still strong because buyers have started to build inventories. The monsoon season typically runs from June to September, and base oil requirements weaken during this period because heavy rains create logistical problems.
A Japanese trader was also in discussions to sell a number of small naphthenics base oil cargoes to India, as availability of U.S. pale oil has also dwindled.
A Russian supplier was also understood to be trying to place Group I cargoes into India and China at attractive prices, but further details were not forthcoming.
Also in India, there were reports that Hindustan Petroleum Corp. Ltd. (HPCL) had scrapped a 5,000-ton Group I export tender issued on May 12 because of low bids. The tender comprised 2,000 tons of SN150 and 3,000 tons of SN500.
In Japan, demand for finished automotive lubricants has declined since early April, so base stock requirements have also diminished. Car sales experienced a jump in February and March ahead of a 3 percent April 1 hike in the national consumption tax, but sales plummeted in April and May, sources said. Last-minute buying of everything from cars and motorcycles to televisions and refrigerators drove a 1.5 percent quarter-to-quarter rise in gross domestic product for the three months to March, compared to a mere 0.1 percent increase in the last quarter of 2013.
Given the slowdown in the domestic base oils market, Japanese producers were heard to be exploring the possibility of increasing exports. Several cargoes were shipped out of Japan to Southeast Asia and China in recent weeks, although they were believed to be intra-company movements by Idemitsu.
Base oil pricing was generally stable in Asia, although bright stock appears to have edged up.
On an ex-tank Singapore basis, Group I prices were holding at $1,060-$1,100/t for SN150. SN500 oils were reported at $1,080-$1,130/t, and bright stock at $1,190-$1,250/t.
On an FOB Asia basis, Group I SN150 was unchanged from the previous week at $950-$980/t FOB Asia. SN500 was steady at $1,030-$1,070/t, and bright stock was assessed at $1,170-$1,220/t, all FOB Asia, with bright stock reflecting a $10-20/t hike week on week.
Group II 150 neutral was heard at $1,010-$1,050/t FOB Asia, while 500N was mentioned at $1,050-$1,080/t FOB Asia.
In the Group III segment, 4 centiStoke and 6 cSt oils were assessed at $1,030-$1,080/t FOB Asia, and the 8 cSt grade was stable at $1,020-$1,050/t FOB Asia.
On the shipping front, it appears that most inquiries were focusing on shipments out of Korea, with a couple movements out of Sriracha, Thailand, noted as well. A 5,000-ton cargo of 600N was being discussed from Ulsan or Yeosu, South Korea, to Antwerp, Belgium, for May 20-June 10 lifting. A large 8,400-ton parcel was on the table for Yeosu to Sharjah, United Arab Emirates, for second half May shipment. A 500-ton lot of 600N was expected to be shipped from Yeosu to Taichung, Taiwan, May 20-29. A 3,500-ton cargo comprised of four grades was quoted for Yeosu to Merak, Indonesia, for June 15-25 shipment.
Finally, a 4,000-ton parcel was being worked on for Sriracha to Chittagong, Bangladesh, for prompt to June 7 lifting, and another 5,000-ton lot was expected to be shipped from Sriracha to Malacca, Malaysia, or Chittagong during the second half of May.
Upstream, June ICE Brent Singapore futures were trading at $109.94 per barrel in afternoon trading May 19, compared with numbers at $108.34/bbl on May 12.