Activity in the Asian base oil market has started to wind down ahead of years end, with long supply, sluggish demand, and plunging crude oil prices adding to the bearish sentiment observed in recent weeks.
Given the recent slowdown in demand and the fact that inventories have started to build, producers were expected to run plants at reduced rates over the next couple of months, or to take advantage of the slow period to complete routine turnarounds at their base oil facilities.
It was heard that Taiwanese producer Formosa Petrochemical would be idling its 600,000 metric tons per year API Group II plant in Mailiao for a one-month maintenance program in March. The previous turnaround at this plant was conducted in August and September 2013.
There were also reports that SK Lubricants would also be shutting down its 1.97 million t/y Group II/III plant in Ulsan, South Korea, for maintenance in March, although there was no producer confirmation.
Meanwhile, in China, Sinopec Jinans 150,000 t/y Group II unit in Jinan, Shandong, was understood to be undergoing a turnaround that started in mid-December. The plant is expected to restart in mid-January.
Also in China, Sinopec Jingmen was heard to have shut down its 100,000 t/y Group II base oils plant in Jingmen in mid-November for maintenance and upgrades, but it was not clear whether the plant had been restarted.
While some plants are offline for maintenance early next year, new capacity is expected to be brought on stream. ExxonMobil will be bringing an API Group II expansion online at its Singapore plant in early 2015. It was heard that test runs could start as early as January. The company has not revealed the amount of base oil that will be added to its slate of products.
The Takreer plant in Abu Dhabi was heard to be on track to stream 100,000 t/y of Group II and 500,000 t/y of Group III in the first couple of months of 2015.
With fundamentals not anticipated to change significantly within the next few weeks, base oils prices are likely to remain exposed to downward pressure.
Following recent downward adjustments by several large Asian suppliers, it was heard that a Southeast Asian producer would be reducing its ex-tank prices once again, less than two weeks after a previous revision that applied to Group I oils – with the exception of bright stock – and Group II cuts. That move resulted in price cuts of $50/t to $90/t, depending on the grade, as of Dec. 3.
This time, the producer lowered its prices by $45/t to $65/t for Group I solvent neutral 150 and SN500, and $25/t for bright stock. In the Group II category, prices were decreased $25/t to $45/t for 150 neutral and 500N, according to market sources. The decreases were heard to have become effective on Dec. 12, but no producer confirmation was forthcoming.
Buyers welcomed the lower numbers, but consumers downstream lamented that the drops in crude oil and base stock pricing had not made it down the supply chain, and few decreases had been seen on the finished lubricants side.
Sources on the supply side explained that changes in the lubes segment typically have a lag time in comparison with revisions implemented on base oils, and that some lubricants suppliers had started to offer competitive pricing to a number of accounts, even though there had not been an official notification about decreases.
Asian base stock spot price indications were stable to soft again this week, with some grades moving down on lower buying and selling ideas, and others remaining unchanged.
There was some discussion in China regarding offers of base stocks at lower levels than previously seen. However, most sources concurred that bright stock prices were fairly stable, given steady demand and balanced supply levels, with price ideas still hovering around an average of $1,160/t FOB Asia.
On an ex-tank Singapore basis, Group I SN150 prices were assessed at $850-$890/t, and SN500 at $830-$890/t. Bright stock was unchanged at $1,170-$1,210/t.
In Asia, Group I SN150 was heard down by $20/t at $750-$770/t FOB, while SN500 was down $30/t at $720-$750/t FOB. Bright stock prices were unchanged at $1,150-$1,170/t FOB.
Within the Group II segment, prices underwent the largest revision and were down $40/t at $720-$740/t FOB Asia for 150N, and at $730-$760/t FOB Asia for 500N.
In the Group III segment, prices of 4 centiStoke and 6 cSt oils were holding at $1,000-$1,020/t FOB Asia, although some sources said discussions at $1,020-1,030/t FOB were also taking place. The 8 cSt grade was assessed slightly softer at $910-$940/t FOB Asia, reflecting a $30/ton drop from last week.
Discussions in the shipping market centered on several inquiries to ship product from South Korea. A 3,000-ton cargo made up of two base oil grades was being quoted for Ulsan to Dongguan, China, for Dec. 15-20 shipment. An 800-ton lot was on the table for Ulsan to Tianjin, China, for Jan. 6-10 lifting, with a 1,000-ton parcel also discussed for Ulsan to Zhapu, China, for the same dates.
A 5,000-ton parcel was being worked on for Yeosu to Beihai, China, for Dec. 15-23 lifting. A 500-ton cargo was likely to be shipped from Yeosu to Taichung, Taiwan, on Dec. 16-30, while a 1,000-ton lot was on the table for Yeosu to Tianjin for the same dates. A 2,000-ton lot was also expected to ship from Yeosu to Nantong, China, on Dec. 16-30. A 2,000-ton parcel was on the table for Onsan to Mid-China for Dec. dates. A 2,000-ton cargo of two grades was mentioned for Daesan to Godau, China, for Dec. 20-30 lifting.
Lastly, a 1,500-ton lot was being discussed for Mizushima, Japan, to Busan, South Korea, for prompt shipment. A 2,500-ton cargo was expected to be shipped from Livorno, Italy, to Mumbai, India, on Dec. 20-22.
Upstream, January ICE Brent Singapore futures were trading at U.S. $62.57 per barrel in afternoon trading on Dec. 15, compared to $67.99 per barrel on Dec. 8.