With the center backed by the BOE, we want to [expose] the local petrochemical industry to the advantage of Tianjin as a major Chinese port city, attracting more base stock suppliers to move forward from traditional offline trading to online trading, the collaborating companies said in a Dec. 29 news release.

Currently, only three base oils are traded at the center, all supplied by Linxian. They are HVI150, HVI200, HVI500 – three base stock categories defined by Q/SY44-2009, a base stock standard developed by CNPC in 2009 and that is widely adopted by Chinese producers. Those grades correspond to 150, 200 and 500 solvent neutrals.

Since the center was launched in late December, base oil has become one of the top three commodities traded at the BOE in terms of turnover, trading center Director Wang Hongwei told Lube Report Asia. In 2014, our goal is to get more suppliers to join us. In fact, some have already contacted us.

The center provides a platform for base oil buyers and sellers to list base oils that they desire to purchase or have to sell according to parameters such as volume, quality and price. Parties may then contact each other and through the center to negotiate terms such as packaging and delivery methods.

To make delivery easier, companies may store cargoes at Linxians logistics park, which is located in Tianjin Nangang Industrial Zone. The park has 70,000 cubic meters of base oil storage area, plus facilities for blending base stocks and producing engine oils.

Wang said Linxian blends imported base oils, mainly from Russia, Indonesia and South Korea. According to Linxian, daily blending capacity is about 2,000 tons. Linxian is a unit of Taiyuan Petrochemical Industrial Trade Group, a privately owned lubricant and grease producer based in Taiyuan, Shanxi province.

Right now, most companies we are talking to are base oil traders, but we also want to attract refineries, Wang said, adding that Chinese refineries are concerned that online trading could damage their business offline.

Its actually the other way around, he said. Spot trading allows refineries to reach customers directly, and our warehouse in Linxian can significantly lower the distribution cost, and therefore the price. Its a win-win strategy for oil producers.

But in China, Wang added, refineries are not as experienced as other commodity manufacturers when it comes to electronic trading.

It will take a little while to convince them that we are going to help their business grow, Wang said.

Aside from Chinese refineries, the center is also trying to attract foreign base oil producers. Wang said refineries from countries like Japan, Germany and Malaysia have contacted the center to seek partnership.

We are working on trading settlements [transacted in Chinese yuan] to make it easy for Chinese buyers, Wang said.