Prices in the Asian base oils market were largely flat, and demand appears to have lost momentum, but sellers hope that buying appetite will again pick up if prospects become more clear-cut.
With the start of the summer holidays and the observance of Ramadan in several countries of the region, the first signs of the slowdown typically seen after the busy spring season have started to emerge.
Buyers have turned cautious because there are no discernible indications whether demand from the downstream lubricant segments will maintain a healthy profile in the second half of the year.
Limited availability of heavy-vis grades, both within the API Group I and II segments, has also hampered the conclusion of business.
Plant turnarounds at major Asian Group I and II facilities during the first two quarters, together with strong demand for the heavier oils, were said to have led to snug conditions in the heavy-vis sector.
In Taiwan, Formosa Petrochemical was heard to have caught up with spot base oil shipments, following a plant turnaround that started in early March and was completed at the end of April. Formosa’s plant has a capacity of 600,000 metric tons per year of Group II grades.The producer had mostly suspended spot exports because of limited availability during the shutdown.
While Formosa had made efforts to fulfill a majority of its contractual obligations during the turnaround, spot availability had been negligible, according to sources.
Taiwanese consumers were heard to be keen on securing cargoes from local supplier because prices are usually more competitive and there is less risk involved compared to buying import cargoes with longer lead times.
In South Korea, there were also reports that SK Lubricants had quietly undertaken a turnaround at its 300,000 t/y Group II production train in Ulsan, for about a month in mid-March as well.
In Japan, several producers are wrapping up maintenance programs at their Group I facilities, which should lead to improved availability for exports.
Another factor that was impacting Asian buyer’s projections as far as purchases are concerned is the perception that there will be more product in the market during the second half of the year because of new production having recently come on stream, and the relative absence of plant turnarounds during that period.
It was heard that ExxonMobil has been offering larger volumes of Group II base stocks from its Singapore refinery, following the completion of its Jurong base oil expansion in Singapore earlier this year.
While the producer has not revealed the additional quantities coming to the market, market analysts estimate that the total Group II capacity at the Jurong plant has grown to over 1.5 million tons per year.
Sources said that a vast portion of the production is for the producer’s own downstream operations, but there are significant volumes being exported. It was heard that some of ExxonMobil’s product is making its way to countries in Southeast Asia, as well as China.
China has also been receiving numerous cargoes from the fairly new Hyundai Oilbank-Shell Group II plant in Daesan, South Korea, which started operations about a year ago.
Chinese traders have seen a slight slowdown in activity due to uncertainties related to the economic situation, not only in China, but within the European Union given Greece’s financial crisis.
China’s stocks markets have been swinging sharply since the middle of last month, with shares up 6 percent one day, and down 5 percent the next, according to media reports. Financial analysts said that the Shanghai Composite–the world’s third largest stock exchange if the value of its companies is added up–has lost 24 percent since June 12.
Despite the uncertainties, base oil prices in Asia were assessed largely stable this week, with trading said to be subdued and discussions for July shipments heard to be underway.
On an ex-tank Singapore basis, Group I SN150 prices were assessed at $660/t-$680/t, SN500 was heard 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 unchanged 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 heard at $720/t-$740/t FOB Asia.
There were few changes noted in the Group III segment, with prices mostly assessed at the same levels as the previous week. The 4 centiStoke and 6 cSt oils were holding at $920/t-$940/t FOB Asia, while the 8 cSt grade was steady at around $700/t-$720/t FOB Asia.
Shipping activity was heard to be steady, with the spotlight falling once again on shipments from South Korea to various destinations in Asia, but also a couple of cargoes expected to be lifted from Japan in coming weeks. A 3,000-metric ton cargo composed of three grades was on the table for Ulsan to Ennore, India, forshipment after July 15. A 2,300-ton lot of three base oil grades was being worked on for Yeosu to Kaohsiung, Taiwan, for July 10-15 lifting. A 1,500-ton parcel of two grades was expected to be shipped from Yeosu to Haiphong, Vietnam, between July 15-30. A 4,700-ton cargo of six grades was discussed for Yeosu to Mumbai, India, forJuly 20-25 shipment. A 1,500-ton lot was on the table for Yeosu to Merak, Indonesia, for July 23-27 lifting.
In Japan, a 2,000-ton cargo was quoted from Yokkaichi to Tianjin, China, forJuly 25-27 shipment. A 2,000-ton lot was being worked on for Negishi to Manila, Philippines, for July 23-25 dates.
Upstream, August ICE Brent Singapore futures were trading at $59.32 per barrel in afternoon trading on July 6, compared to $61.91 per barrel on June 29.
Gabriela Wheeler can be reached directly atgabriela@LubesnGreases.com