Group II Price Index Tested in China


Chinese lubricant associations and refiners are testing a price index for API Group II base oils, a first step toward what is intended to be a broader source of transparent information about base oil values.

The index is based on prices provided by base oil producers and purchase price information gathered from association members, supplemented by China diesel oil and global crude oil prices – all factored into an algorithm to calculate one price for Group II 150 neutral. That price is then published by the associations, currently for no charge.

The Shanghai Lubricant Trade Association designed the index, and regional lubricant trade associations in Fujian, Shandong and Guangdong provinces and the city of Tianjin have since joined the program.

Our goal is to build a neutral platform to provide more transparent prices for China base oils, SLTA President Wu Yuedi, who also founded Shanghai-based base oil supplier Naco Synthetics, told Lube Report.

The index was first published on Dec. 28, when the price was 7,281 (U.S. $1,072) per metric ton. On Jan. 12 it was 7,367/ton.

A number of news organizations, including LubesnGreases, ICIS and Platts, publish information about base oil prices. Usually this consists of ranges of spot prices for different viscosity grades in different locations, including China, though posted prices are published for North America. ICIS and Platts charge for subscriptions to their reports, while LubesnGreases includes pricing information in its Lube Report newsletters, which are distributed through free subscriptions.

It is unusual for companies and organizations within the industry to cooperate in the way that the Chinese parties are. Wu said the new Chinese index may vary from prices published by other sources because it factors in crude and diesel prices.

The association chose to begin by indexing 150N because it is produced in greater volumes than any other viscosity grade in China. Wu noted that refiners continue to add to that volume. Hengli Petrochemical recently opened a plant at Dalian with capacity to make 350,000 t/y of Group III and 190,000 t/y of Group II, including 150N. Hainan Handi Sunshine Petrochemical plans to complete an expansion in coming months of its Group II plant on the island of Hainan, which makes 150N, 60N and 500N.

Wu added that 150N is produced in such high volumes because hydrocracking technology skews base oil plant output toward that viscosity and because Chinese refiners prefer to maximize production of that grade since they have the flexibility to turn it into diesel when base stock demand weakens.

If the new indices becomes widely recognized and trusted in China, Wu said it may help the Shanghai association form a national base oil committee that can make regulations and push for standards for Chinas base oil business.

Ultimately, we want to help Chinese base oil producers grow, he said.

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