The Asian base oil market moved at a slightly more sedate pace than in recent weeks, partly because participants are holding off on finalizing transactions as fundamentals could be shifting.
With the start of the summer and the observance of Ramadan in several countries of the region, together with the arrival of the monsoon season in India, participants were under the impression that demand from downstream markets has started to slow down.
In India, aside from a seasonal weakening brought about by the monsoons in the June-September timeframe, the arrival of several imported cargoes–many from the U.S.–have placed pressure on local price ideas.
The heavy rains do not necessarily affect manufacturing rates, sources said, but logistics and transportation from ports into the interior can definitely be impacted by the adverse weather.
Within the API Group I category, bright stock, which had so far enjoyed very firm pricing on the back of tight supply and healthy demand in India, was heard to be discussed at levels $10-15/ton below early June indications.
Meanwhile, in the U.S., where a large number of import cargoes originate, Group I producers have implemented price increases on the heavy-vis cuts and bright stock.
In China, economic uncertainties have made traders and end-users turn cautious about acquiring more material than necessary, with bank lending having tightened significantly due to new policies implemented by the government.
The uncertainties have also had an impact on the automotive industry, where sales have been less robust than a year ago. Despite offering steep discounts, automakers failed to improve the slowing growth in car sales in China last month.
Passenger-vehicle deliveries rose 3.8 percent from a year earlier to 1.57 million units, making last month the worst May ever in terms of sales growth, a Bloomberg report said, quoting Cui Dongshu, secretary-general of the Passenger Car Association.
In South Korea, the car industry has taken a hit as well, with Hyundai Motor Co.’s domestic deliveries falling 8.2 percent in May from a year earlier, while overseas sales declined 6.1 percent, according to local press reports. A weaker yen also gave Hyundais Japanese rivals a competitive edge, the reports added.
Similarly, car sales in Japan are anticipated to decline this year compared to a year ago, sparking concerns for automotive lubricant producers who are forced to review their base oil purchase estimates for the remainder of the year.
Toyota expected a sales decline in 2015 due to soft conditions in Japan, where tax changes have affected demand, a Wall Street Journal story said.
At the same time, turnarounds at three Japanese base oil plants–those of JX Nippon, Cosmo Oil and Idemitsu Kosan–have resulted in a tightening of base oil availability, so the market is fairly tight, according to sources. The reduced supply has mostly impacted exports however, because Japanese producers typically give priority to fulfilling domestic requirements, sources explained.
Both Idemitsu Kosan and Cosmo Oil were anticipated to restart their plants in late June/early July, following routine turnarounds, but no updates were available at the time of publishing.
Base oil prices were assessed largely unchanged week on week in Asia as discussions for July shipments are ongoing and many transactions have not been finalized yet. There is a gap of about $10-20/ton separating selling and buying ideas, with consumers holding a fairly hesitant attitude about base oil requirements moving into the second half of the year.
On an ex-tank Singapore basis, Group I SN150 prices were heard at $660/t-$680/t, SN500 was gauged at $780/t-$800/t, and bright stock was steady at $1,110/t-$1,130/t.
On an FOB Asia basis, Group I SN150 was assessed at $560/t-$590/t, SN500 at $680/t-$700/t FOB, and bright stock prices at $1,080/t-$1,100/t FOB.
Within the Group II category, prices for 150N were mentioned at $580/t-$610/t FOB Asia, and prices for 500N were unchanged at $720/t-$740/t FOB Asia.
In the Group III segment, little fresh information was forthcoming and prices were therefore left unchanged. The 4 centiStoke and 6 cSt oils were assessed at $920/t-$940/t FOB Asia, while the 8 cSt grade was gauged at around $700/t-$720/t FOB Asia.
On the shipping front, as usual, there were a good number of inquiries to move product from South Korea to China, India, Taiwan, and other destinations in Asia and the Middle East. A 1,500-ton lot of two base oil grades was quoted for Yeosu to Dongguan, China, for late June lifting. A 3,850-metric ton cargo of five grades was expected to be shipped from Yeosu to Mumbai, India, during the first half of July. A second 5,000-ton lot was also mentioned for Yeosu to Mumbai for July 20-25 lifting. A 3,000-ton lot of three grades was being discussed for Yeosu to Ennore, India, for July 20-25 shipment. A 600-ton cargo was expected to cover Yeosu to Taichung, Taiwan, for July 10-15 shipment.
A 1,500-ton parcel made up of two grades was on the table for Yeosu to Merak, Indonesia, for July 23-27 shipment. A 3,000-ton cargo of two grades was being worked on for Yeosu to Mesaieed, Qatar, for July dates.
Elsewhere, a 5,500-ton lot was mentioned for Hong Kong to Yokohama, Japan, for July 7-10 shipment. A 2,000-ton parcel of two grades was on the table for Malacca, Malaysia, to Hamriyah, United Arab Emirates, for July dates. A 2,000-ton cargo was expected to be shipped from Negishi, Japan, to Manila, Phillippines, for July 21-25 lifting.
Upstream, August ICE Brent Singapore futures were trading at $61.91 per barrel in afternoon trading on June 29, compared to $63.46 per barrel for July futures on June 22.
Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com