In most markets, base oil prices have risen significantly in the past two years, but in Nigeria, they have headed in the opposite direction. Local lubricant blenders say its because of a surge in the number of players importing to the country.
There are a lot of base oils being imported into the country, and I think that is one of the reasons why the prices of base oils are stagnating in the country, Taiye Williams, managing director of Lubcon International, a lubricant marketer based in Ilorin, Nigeria.
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Emmanuel Ekpenyong, head of operations at Puma Energy, Nigeria, agreed there is a glut on the local base oils market.He explained that numerous new players began importing base oils to Nigeria during the past year or so.
At the outset of base oil scarcity in 2015 and 2016, the first set of players that imported base oils into the country made a kill, he said. Their cargoes were over-priced and a few players were dominant. This was because it was tough to obtain foreign exchange for the import of goods, and prices of base oils went as high as 430 naira per liter for the SN900 and SN500. After that, more players went into the business.
Foreign currency availability has also loosened since then, Ekpenyong said. Local prices for API Group I solvent neutral 500 and SN900 are now hovering around 345 to 350 naira per liter (U.S. $0.95 to $0.97 per liter), sources said, a decrease of about 20 percent. By contrast, European export prices for SN500 have risen by around 50 percent in the past two years, from between $585 and $610 per metric ton in August 2016 to $875/t-$910/t this week.
Local base oil prices are still higher than international prices on a per-unit basis because of costs for additional handling at the local level and because volumes per transaction are much smaller.
Emeka Obidike, executive secretary of the Lubricant Producers Association of Nigeria, said he does not believe there is a glut on the local base oils market but acknowledged that prices may have been influenced by an increase in importers.
What happened is there is an increase in the number of small players importing base oils into the country, he told a reporter. To a larger extent most of the blending plants are able to bring in small quantities – as little as 500 liters – that enable them to manufacture lubricants. However, I dont agree there is a glut because if a truck does not come in for one month, there will be a crisis on the local market.
Obidike added that other factors may also be contributing, such as seasonal weather patterns. The months of May through August are a rainy season in Nigeria, and consumption of lubricants declines sharply during that time. Ekpenyong noted that local base oil prices typically rise in October.