Base oil prices in Asia were buoyed by a tight supply scenario, firm crude oil and feedstock costs, and healthy demand.
Despite the absence of some players due to early May holidays and the Golden Week in Japan, there was plenty activity in the market as buyers were in search of late May cargoes, facing some difficulties in locating sizeable parcels.
A number of producers have little to no spot supply to offer, and participants were heard to be securing cargoes in other regions because of limited availability in Asia.
API Group II cargoes of Northeast Asia origin going to China have been sparse because Taiwanese producer Formosa Petrochemical is preparing for a turnaround.
There have also been recent plant outages in the region, and South Korean suppliers have limited spot supply to China, as they have been moving large quantities to Southeast Asia and India.
Chinese importers have resorted to arranging shipments of Group I cuts from Europe and Group II oils from the United States to make up for the lack of tonnage in Asia; most of these cargoes will be arriving in June, according to sources.
However, whether bringing product from other regions will continue to work remains to be seen, as base oil prices are also going up elsewhere, particularly the U.S., where producers Chevron, ExxonMobil, and Kleen Performance Products have dominated price hikes.
Formosa has not shipped any spot cargoes to China in at least three months, and has also cut back dramatically on the volumes sent to long-term customers because it is preparing for a two-month turnaround at its Group II plant in Mailiao, starting in June. The plant has capacity to produce 600,000 tons per year of Group II base oils, according to data from Lubes’n’Greases Global Guide to Base Oil Refining.
In China, it was heard that Shandong Heng Runde Group was finishing a maintenance shutdown at its base oils unit in Shandong province, which started in April. The plant manufactures 200,000 t/y of Group II base oils.
As a result of all of these conditions, spot offers from Asian suppliers have edged up, particularly for the Group II heavy-viscosity cuts. Some price ideas were heard to have increased by U.S. $10 to $20 per metric ton on an FOB Asia basis week on week.
There have also been upward adjustments on domestic prices in Taiwan, where Formosa has moved up its list prices for May shipments.
According to sources, the producer lifted its May list prices for the 70 neutral and 150N cuts by New Taiwan dollar 0.47 per liter, and its 500N list price by NT$1.44/l. The producer similarly marked up prices in April.
Buyers said they had to accept some of the higher indications because they had no choice as availability was tight, but wondered whether the upward price momentum would last.
Many thought that economic conditions in most countries were still unpredictable, and that the finished lubricants segment was not showing much growth. These participants speculated that the end of the spring/summer season and the accompanying drop in demand would stymie the upward trend observed of late.
While many price ideas moved up for exports in Asia, indications on an ex-tank Singapore basis underwent no changes this week. The Group I solvent neutral150 cut was holding at $530-$550/t ex-tank Singapore, and SN500 was unchanged at $600/t-$620/t. Bright stock was also steady at $1,010/t-$1,030/t ex-tank Singapore.
The Group II 150N cut was holding at $510/t-$530/t ex-tank Singapore, and the 500N was heard at $640/t-$670/t ex-tank Singapore.
On an FOB Asia basis, Group I SN150 inched up by $10/t to $440/t-$460/t; the SN500 was also adjusted up by $10/t to $520/t-$550/t FOB. Bright stock was steady at $900/t-$930/t FOB.
In the Group II category, the 150N cut was assessed up by $10/t at $490/t-$520/t FOB Asia, while the 500/600N jumped by $20/t to $640/t-$670/t FOB Asia.
The 4 centiStoke and 6 cSt oils were unchanged at $860/t-$890/t FOB Asia, and the 8 cSt grade was assessed at $610/t-$630/t FOB Asia.
Crude oil prices continued to exert upward pressure on base stock, with oil futures surging on Thursday as a devastating wildfire near Canadas oil-sands region forced producers to stop output, while fighting in Libya jeopardized production in that country as well.
ICE Brent Singapore futures closed at $45.89 per barrel in afternoon sessions on May 5, compared to $46.79 per bbl on May 2.
Gabriela Wheeler can be reached directly at gabriela@LubesnGreases.com.
Lubes’n’Greases Publications shall not be liable for commercial decisions based on the contents of this report.