Asian refiners have long helped quench the worlds thirst for API Group II and III base stocks, but they will face growing competition both abroad and at home from suppliers in the Middle East and elsewhere, according to ICIS analysts.
In the 1990s, South Koreas SK Lubricants and S-Oil became the worlds first large merchant suppliers of Group III and II base stocks, exporting to North America, Europe and Japan to help meet demand in the worlds most advanced lubricant markets.
The industry diversified over the years, with the U.S. and Chinese supply bases largely shifting to Group II, more Group III and II plants sprouting along the Pacific Rim and additional Group III capacity coming online in Europe. In the past few years several large plants have opened in the Middle East, and Luberefs Group I plant in Yanbual Bahr, Saudi Arabia, is preparing to complete a large Group II upgrade and expansion.
Marketers of those oils are already exporting them to Europe and the United States where they bump into Asian suppliers, and ICIS Senior Editor Manager Veena Pathare said they will soon venture into the backyards of Asian companies.
We dont see the Middle East being a big player yet in China, but we do expect to see that going forward, she said Oct. 10 at the Middle Eastern Base Oils & Lubricants Conference in Dubai. She added that base oil markets in China and India will become more competitive for suppliers.
In China that will be due in part to expansions planned at several domestic plants and PetroChinas plans to upgrade several of its Group I facilities. Pathare said ICIS expects U.S. refiners will also join the fray in Asia, expanding on their current business in India.
China and India are the key big-volume markets, she said. These markets are really attractive to suppliers both in Asia and the Middle East.
Increasing availability of Group II - along with attractive pricing - will bring increased pressure on Group I plants in Asia. In North America and Europe, that very dynamic caused numerous Group I plants to close over the past two decades.
Group I share in Asia will come under pressure from Group II supply in the Middle East, within Asia and also [from] the U.S., Pathare said.