Tight conditions continued to be reported in the Asian base oils market, with a number of plants undergoing turnarounds and others lined up to shut down in coming weeks.
The ongoing turnarounds have limited the amount of product offered for spot business, but buyers said that a large portion of their requirements were currently being met by contract volumes. Suppliers reported generally steady demand levels, with some segments seeing more tightening than others.
Availability of API Group I grades seemed to be more limited than other grades, due to global plant rationalization and turnarounds at a few plants in Europe, the United States and the Middle East against fairly healthy demand.
The restrictions on spot availability of Group II and III grades were mainly the result of turnarounds at two South Korean plants, a Malaysian unit, and upcoming maintenance at a Taiwanese unit and a Chinese facility. A potential production outage at a Middle East plant could exacerbate the snug fundamentals as well.
In South Korea, SK Lubricants was heard to have been taken its Ulsan base oil plant off-line in early March for a one-month maintenance program, and was likely to restart it in early to mid-April. SKs unit can produce 701,000 metric tons per year of API Group II base oils and almost 1.3 million t/y of Group III cuts, according to LubesnGreases Global Guide to Base Oil Refining.
Spot availability from the producer has been limited, and the company will continue to monitor sales over the next few months, a source familiar with the companys operations said. SK regularly exports substantial amounts to China and the U.S., as domestic Group III production is comparatively small.
Reports that the S-Oil Group III plant in Onsan, South Korea, had also been idled for a one-month turnaround also circulated, but no producer confirmation could be obtained. S-Oils unit can manufacture 1 million t/y of Group III base oils.
In Malaysia, Petronas was also heard to have embarked on a turnaround at its plant in Melaka, Malaysia, which can produce 268,000 t/y of Group III base oils. The plant was taken off line in late February and was expected to remain off-line until the first week of April.
Meanwhile, Formosa Petrochemical was heard to be likely to suspend spot shipments of Group II oils to China in preparation for a turnaround in July. The plant in Mailiao, Taiwan, had also suffered a few minor output hiccups at the end of last year due to issues at an upstream refinery unit. The producer was heard to continue shipping its term commitments to China on a regular basis, although volumes may be adjusted month to month.
Softer demand was noted in China, where current inventories were heard to be considered adequate to cover requirements, despite imports registering a decline in February. This was partly attributed to the Lunar New Year holidays celebrated during that month.
At the same time, it was heard that Chinese base oil producers have been steadily increasing output over the last couple of months, and domestic prices have edged up because of the reduced imports and more limited availability of a majority of grades.
Later this year, the Hyundai-Shell base oils plant in Daesan, South Korea, which exports substantial amounts to China each month, was scheduled for a month-long turnaround, starting in mid-August. The plant has capacity to produce 650,000 t/y of Group II base oils.
While this outage will follow closely on the heels of the Formosa Group II turnaround, it was expected to coincide with a less active period in the lubricants sector.
Also in China, Sinopec Jingmen was expected to start a turnaround at its base oils plant in Jingmen in September this year. The unit can produce 203,000 t/y of Group I and 100,000 t/y of Group II base oils.
There were also rumblings that the Shell-Qatar Petroleum Pearl gas-to-liquids base oil plant in Ras Laffan, Qatar, was due for a turnaround, which would be taking large amounts of Group II/III oils out of the market, but this could not be confirmed. The plant has capacity to produce 300,000 t/y Group II and 1,072,000 t/y of Group III base oils.
Despite ongoing efforts by producers to achieve higher spot base oil pricing due to the snug supply and firm feedstock values, their attempts have met with buyer resistance and prices were generally assessed stable from a week ago, although transactions seem to be taking place close to the high end of the prevailing price ranges.
On an ex-tank Singapore basis, Group I SN150 was heard at $740/t-$760/t, and the SN500 cut at $850/t-$870/t. Bright stock was unchanged at $930/t-$950/t, all ex-tank Singapore.
Group II 150 neutral was steady at $760/t-$780/t, and 500N was heard at $910/t-$930/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 was assessed at $680/t-$700/t, and the SN500 grade was at $780/t-$800/t. Bright stock was heard at $830/t-$860/t FOB Asia.
Group II 150N was unchanged at $700/t-$720/t, and the 500N/600N at $800/t-$830/t, all FOB Asia.
In the Group III segment, the 4 centiStoke and 6 cSt grades were assessed at $810/t-$830/t, and the 8 cSt at $790/t-$810/t, FOB Asia.
In other industry-related news, Chinas National Development and Reform Commission has announced increases for the retail price of gasoline and diesel, the third increase this year, Xinhuanet reported. Gasoline will be increased by Chinese Yuan (CNY) 170 per metric ton and diesel by CNY 165/t as of March 29, or about U.S. $27 and $26/t, respectively, in line with higher international crude values. Fuel price adjustments can affect lubricant demand in China as they influence consumer driving patterns.
Crude oil prices were little changed on Thursday, hovering at the lower levels seen on Wednesday, after the release of weekly US crude data pushed prices down. The data showed crude inventories rose 1.6 million barrels in the week ended Friday, March 23, while analysts had expected a build of 1 million barrels. The easing of geopolitical tensions that had buoyed futures earlier in the week also weakened support in the market.
On Thursday, March 29, Brent May futures were trading at $69.93 per barrel on the London-based ICE Futures Europe exchange, compared to $68.98 per barrel on March 22.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
LubesnGreasesshall not be liable for commercial decisions based on the contents of this report.