State-owned Thai Oil Group reported that profit for its baseoil business slumped last year and that it expects the market to continue to soften throughout this year.
Subsidiary Thai Lube Base Public Co.s net profit dropped 41 percent to 1.1 billion baht (U.S. $34 million) in 2018. The company said margins were pressured by capacity additions to the international base oil market, especially in Saudi Arabia and China.
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Thai Lube Base operates an API Group I base oil plant with capacity to make 267,000 metric tons per year in Sriracha, Thailand. The average margin between prices for those oils and feedstock costs dropped 25 percent to U.S. $84 per ton in 2018, from U.S. $112/t in 2017, according to a presentation to company shareholders.
This year, we expect new capacity of Group II and Group III [production] coming into the market – a total capacity of around 3 million tons per annum – mainly from China, a company spokesman said.
Thai Oil Group expects roughly 1.2 million tons of net additional capacity to come on stream globally in the first half of this year,and another 1.8 million tons in the second half. Most of the new capacity is expected to be Group II. With new supplies, the company forecasts 2019 will remain a soft base oil market.
Currently, we do not produce Group III base oil and do not have any plan for investing in or expansion of our base oil plant, he added.
The company produces only Group I oils, which are mainly used in industrial and marine lubricants and in engine oils for older engines. Fifty percent of base oil volumes are sold in the domestic market and the remainder is exported, he added.