Base oil capacity additions globally are expected to challenge the traditional trade flow of base stocks from Asia-Pacific to other regions.
Consultancy Kline & Co. estimated Asia-Pacifics base stocks supply at just below 16 million metric tons, with demand at more than 15 million tons. The estimated supply and demand totals exclude Group IV and V base stocks.
Asia-Pacific was tightly balanced on an overall basis, Anuj Kumar, project manager of Kline’s Energy Practice, said during an online webinar Oct. 7. Group II and III base stocks are produced in excess in Asia-Pacific, he noted. Of this surplus, Group III is exported to North American and European markets, while Group II remains mostly in the region, targeted at Group I substitution.
Meanwhile, the Group I market in Asia-Pacific had a deficit, he said, which was partially bridged by imports from other regions such as Europe and the Middle East, as well as by Group III base stocks from Asia-Pacific itself.
Kumar explained that globally, new base oil capacity additions and plant closings are expected to impact the volumes of base oils being shipped between regions and that established trade routes may be altered. Some new trade routes are expected to emerge, and some of the established trade routes are expected to face greater amounts of challenge due to these newly developing routes, he said.
The established trading routes for Group III from Asia-Pacific include to North America and to European regions. He indicated the industry will now see new Group III trade routes developing from the Middle East, which is already supplying to North America and to the Middle East, and that these will create competition for Asian refiners shipping to North America and Europe.
Also, in a few years from now – this has already happened in Europe – regions now often have their own indigenous Group III capacity, which would make it difficult for Asian Group III suppliers to place their products in these markets, Kumar noted.
For Group I base stocks, established routes are primarily from Europe to Africa, and from Europe to South America. For Group II, established routes include three from North America – to South America, to South Asia and to Europe, the latter which has developed quite recently, Kumar noted.
The study is titled, Global Lubricant Base Stocks: Market Analysis and Opportunities.