Asia Base Oil Price Report


Asian base oil values remain flat and suppliers appear to be watching their chances to raise prices slip away as demand begins weakening.

A softening in requirements is not completely unexpected this time of year, as the market slows down from the high production season of March to May.

Demand for the heavy viscosity oils was anticipated to remain fairly healthy throughout summer, especially in Southeast Asia and the Middle East, as these cuts are required for warm weather lubricant formulations.

Producers had hoped to achieve sweeping price increases during this busy period, but their intentions were largely thwarted by weaker-than-expected market conditions and ample availability. Although sporadic spot price increases of between U.S. $10 to $20 per metric ton were pushed through for some grades between April and May, the majority of base oils did not experience fluctuations. Some light-vis cuts and bright stock underwent moderate increases, while the rest of the viscosities in the API Group I and Group II segments were generally steady. The Group III base oils also saw little price action over the past couple of months.

Group III suppliers remained optimistic that demand for higher quality base oils would continue to grow steadily, as major original equipment manufacturers (OEMs) have expanded their presence in China and Southeast Asia and the new car models being produced require more sophisticated formulations, a source said.

A second Group III supplier said that demand from the United States had shown an uptick in recent weeks, because some consumers are starting to build inventories ahead of the hurricane season, which runs from June 1 to November 30. This means that the product needs to be shipped from Asia no later than June or July, the source added.

While most producers in Asia felt frustration at the difficulty in moving prices up, they were also relieved that values had not edged down, but expressed concern that a slowdown in demand might start to exert downward pressure on pricing in coming weeks.

Producers said they would not be able to afford producing some grades if prices fell, as feedstock costs remain high. If the situation is widespread, sources said, producers may have to cut back production rates, but this is not a consideration for the time being, a producer confirmed. Most plants are running full out in Asia, with the exception of those which are undergoing turnarounds, and of the light-viscosity line at CPC-Shells plant in Kaohsiung, Taiwan, which remains offline since July 2013 due to weak market economics.

Japans JX Nippon Oil was understood to have shut down its two Group I base oil units in Mizushima. The larger, 250,000 t/y unit was expected to be off-line from late May for an extended turnaround that could last up to 90 days, while the smaller, 170,000t/y line is scheduled for a month-long turnaround, according to sources. This information could not be confirmed with the producer directly.

In China, sources indicated that Sinopecs Gaoqiao unit in Shanghai, which has a capacity of 300,000 ton per year of Group II base oils, was preparing to be restarted in mid-June, after being shut down since early this year because of a feedstock shortage.

However, another of Sinopecs plants, the one located in Hebei, which can produce 240,000 t/y of Group II oils, appears to remain offline.

Trading slowed down considerably this week as China and Taiwan celebrated the Dragon Boat Festival and South Korean participants observed the Memorial Day holiday.

In India, there are reports that a few cargoes of competitively-priced Group II base oils are due to arrive from the U.S. in the next few days. These parcels were agreed before prices went up in the domestic U.S. market, sources said. Since base oil availability has tightened in the U.S. and prices have climbed, fewer imports were expected to be making their way to India over the next couple of months, with spot supply from two U.S. suppliers in particular said to have dried up.

Some small quantities of Group I were also expected to be arriving from the U.S. and Brazil over the next few days. A bright stock parcel is expected to reach Indian shores this week, agreed at a price of $1,320/t CFR India, and another lot is being discussed in the vicinity of $1,290-1,300/t CFR.

Price ideas for Group II 150 neutral were hovering around $1,010-1,030/t CFR India, while the 500/600N grades were heard near $1,080-1,100/t CFR.

For Group III (4 centiStoke and 6 cSt cuts), prices were mentioned at around $1,050-1,060/t CFR.

Meanwhile, it was also heard that the local producers have cut Group I and II prices in India by an average of $30/t because of an appreciation of the rupee and changes in the governments subsidy program for fuels.

Few fresh spot transactions were reported in Asian markets this week, with prices generally assessed as stable from the previous week.

On an ex-tank Singapore basis, Group I prices were unchanged at $1,060-$1,100/t for solvent neutral 150. SN500 oils were holding at $1,080-$1,130/t, and bright stock at $1,190-$1,250/t.

On an FOB Asia basis, Group I SN150 was assessed at $950-$980/t FOB. SN500 was reported at $1,040-$1,070/t FOB and bright stock was quoted at $1,190-$1,220/t FOB.

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 stable at $1,030-$1,080/t FOB Asia, and the 8 cSt grade at $1,020-$1,050/t FOB Asia.

On the shipping front, activity appears to have picked up the pace, with an interesting inquiry to move a 5,000-metric ton cargo from Onsan, South Korea, to Houston or New Orleans, U.S., on June 15-22. A 1,000-ton lot was also being discussed from Onsan to Tianjin, China, for June 19-22 shipment and delivery on June 23-26. A 1,000-ton parcel of two grades was on the table from Yeosu, South Korea, to Manila, Philippines, on June 5-15. A 1,500-ton lot of two grades was being worked on for Yeosu to Taichung, Taiwan for June 20-25 shipment.

At least three cargoes were expected to be shipped from Kainan, Japan, with a 2,000-ton lot going to Singapore on June 25-30, a second 1,500-cargo going to Busan, South Korea, on July 15-20 and a third 1,500-ton cargo going to Hong Kong on the same dates.

A 3,000-5,000-ton parcel was being discussed for Jakarta, Indonesia, to Nantong, China, for June 10-20 lifting.

A 2,000-ton cargo was mentioned from Karachi, Pakistan, to Sharjah, United Arab Emirates, for prompt shipment.

A large 5,000-ton lot was expected to be shipped from Madre de Deus, Brazil, to Mumbai, India, during June 10-20.

Upstream, July ICE Brent Singapore futures were trading at $109.13 per barrel in afternoon trading June 9, compared with numbers at $109.66/bbl on June 2.

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