Asian producers grappled with volatile feedstock prices this week, together with lackluster seasonal demand for base oils and finished lubricants, which continued to weigh on pricing.
Crude oil values climbed on Wednesday as official data revealed a far larger than expected drop in United States crude stockpiles, but retreated early Thursday in European trading, giving back some of the previous day’s gains as trade talks between the U.S. and China took place in Washington.
Brent October futures were trading at $74.68 per barrel on the London-based ICE Futures Europe exchange on Thursday afternoon, compared to $71.16/bbl on Aug. 16.
Market participants were hopeful that the talks between the U.S. and China would result in a resolution of the ongoing trade dispute, but this appeared increasingly unlikely as the day wore on, S&P Global Platts reported.
In the tit-for-tat tariff exchange – as many observers characterized the dispute – the U.S was scheduled Aug. 23 to start collecting 25 percent duties on 279 goods of Chinese origin, including chemical products, motorcycles, speedometers and antennas, while China was also set to start imposing a 25 percent tariff on $16 billion worth of U.S. goods such as chemical products and diesel fuel.
As reported last week, the list of U.S. goods affected by the new tariff schedule includes lubricating oil and lubricating base oil, grease, paraffin wax, microcrystalline paraffin, other mineral waxes and similar products.
Some sources were of the opinion that the tariffs would have a less severe impact on the base oil trade than many anticipated. Although China does import large quantities of base oils and finished lubricants, it does not depend entirely on U.S. imports, as it also receives material from several regional suppliers, sources noted.
In fact, while China had secured large volumes of U.S.-origin base oils earlier in the year, particularly of Group II grades, the quantities had decreased substantially as more competitively-priced product became available from the Middle East, sources explained.
Those importers and consumers who were previously purchasing U.S. product have been able to find alternative sources in the region, given that availability appeared ample.
This was mostly due to a seasonal slowdown in requirements in the whole region, together with weather-related conditions such as the monsoons and ensuing flooding in India, where demand for lubricants was said to have declined on the back of logistical and transportation issues.
While base oil requirements have softened in Asia, ongoing and upcoming turnarounds at several facilities should help keep the market more balanced, sources noted.
In Taiwan, Formosa Petrochemical’s Mailiao Group II plant was still heard to be undergoing a maintenance program since early July, and the plant was now not expected to be restarted until October, from a previously expected date in early September. The plant can produce 600,000 metric tons per year of Group II base oils, according to Lubes’n’Greases Guide to Global Base Oil Production.
In China, PetroChina was reported to have started a turnaround at its plant in Karamay in early August. The plant’s capacity is 700,000 t/y of Group I and 600,000 t/y of naphthenic oils. The turnaround was believed to affect only the paraffinic lines and was expected to last approximately 45 days.
In South Korea, it was heard that the Hyundai Shell Base Oil joint venture in Daesan had been shut down in mid August for maintenance and expansion work. The plant has a current capacity of 1 million t/y of Group II base oils.
Looking ahead, the Group III segment was expected to experience tighter conditions in September asSK Lubricantswas slated to take its plant in Ulsan, South Korea, off-line in September. The plant can produce 701,000 t/y of Group II and almost 1.3 million t/y of Group III base oils.
Given the current market uncertainties, spot prices in Asia were maintained this week, following downward adjustments the previous week, as many buyers have taken a step back to assess product needs and evaluate conditions.
On an ex-tank Singapore basis, Group I solvent neutral 150 was holding at $760/t-$780/t, while SN500/600 was unchanged at $860/t-$880/t. Bright stock prices have steadied at $925/t-$945/t, all ex-tank Singapore.
Group II ex-tank Singapore assessments were stable week on week, with 150 neutral heard at $805/t-$835/t, and 500N at $890/t-$910/t ex-tank Singapore. On an FOB Asia basis, Group I SN150 was stable at $700/t-$720/t, while SN500 was gauged at $820/t-$840/t. Bright stock was assessed at $850/t-$870/t FOB Asia.
Group II 150N was hovering at $750/t-$770/t, while 500N and 600N was unchanged from last week at $820/t-$840/t, all FOB Asia.
In the Group III segment, 4 and 6 centiStoke grades were holding at $870-$890/t and $850/t-$870/t, respectively, while 8 cSt was heard at $760/t-$780/t, FOB Asia.
In other market-related news, Saudi Arabian energy minister Khalid al-Falih denied a media report published earlier on Thursday that the government had cancelled a planned initial public offering of state oil company Saudi Aramco.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.