The main topic of discussion in Asia was the possibility that the base oils market would become oversupplied in coming weeks, as several plants in South Korea and China are slated to resume production, following annual maintenance, while a Korean producer is scheduled to start up a new base oil plant in June.
A northeast Asian producer whose API Group III base oil plant is about to complete an annual maintenance program is assessing how much product it will have to offer in June. The plant was taken off-line in mid-April for a 40-day turnaround. Negotiations with customers regarding June shipments will likely start next week – monthly discussions typically start earlier in the month, but have been delayed due to the shutdown.
Similarly, a second northeast Asian producer who restarted its Group II and III units in late April has already wrapped up May shipments, which the supplier said had been achieved at increases of $10-$20/metric ton, depending on the volumes and destination. June discussions are expected to heat up in the next couple of weeks. The supplier will likely increase its monthly Group II base oils contract volumes moving to China by about 50 percent in June, with approximately 6,000 tons expected to be shipped.
Suppliers have been trying to keep prices of product moving to China at stable levels, and were even hoping to achieve slight increases, but buyers have shown resistance to the higher offers. Spot deals involving imports remain limited because of the wide gap between buy/sell ideas, which in some cases is as high as $50-$80/t, according to sources. Offers for 150N of northeast Asian origin were heard at $1080-$1100/t CFR China, while 500N was mentioned at around $1180-$1200/t CFR China. Buying ideas were heard to be at least $50/t below these levels.
Buyers were delaying purchases as long as possible in hopes that prices would decline, particularly as increased supplies are expected to become available with the resumption of production at a number of base oils facilities. However, reduced imports from Taiwan in recent weeks, coupled with lower production rates at some local facilities, have helped stall the domestic price slide, particularly in the Group II segment, and have offered support to import price indications. However, traders acknowledged that price increases for imports into China were difficult to achieve if the major local producers China National Offshore Oil Co., Sinopec and PetroChina did not lift domestic postings.
Increases between $10-$30/t have been attained on base oils in other areas such as southeast Asia because of tight availability, sellers and traders said. A number of buyers said they were looking for spot cargoes and had left the trading scene empty-handed given a lack of offers.
Price indications for Group I material on an ex-tank Singapore basis were generally discussed at $1040-$1080/t for SN150, $1100-$1160/t for SN500 and $1190-$1240/t for bright stock.
On an FOB Asia basis, prices are hovering at $950-$980/t for SN150, $1010-$1060/t for SN500 and $1090-$1140/t for bright stock.
Regarding Group II material, prices were assessed at around $970-$1020/t FOB NE Asia for 150N and at $1060-$1110/t FOB NE Asia for 500N, according to sources.
Group III spot prices were heard at around $1030-$1080/t FOB Asia for 4 cSt, 6 cSt and 8 cSt cuts, although some indications were mentioned at above $1100/t FOB Asia for small-volume transactions.
Import/export activity in Asia has been sluggish, as witnessed by the few enquiries that surfaced on the freight market. A 1,000 metric ton cargo was being worked on to move from Onsan to Tianjin around June 18, while a second 1,500 ton cargo was expected to be shipped from Onsan to Tsurumi on June 11-15. A 750 ton parcel of 150N was being discussed to cover Mailiao to Gebze in first half June.
In production news, a fire broke out at Sinopecs Shanghai Gaoqiao petrochemical refinery in Pudong on May 16, according to industry sources. Local media reported that there had been no casualties, and the fire had been extinguished in 30 minutes. The explosion that started the fire was apparently caused by a mixture of hydrogen and gas, although further details were unavailable. It could not be ascertained if the incident had had any impact on Group I and II base oils production at the facility.
Meanwhile, several base oils plants are undergoing turnarounds or will be completing maintenance programs in the next few months.
South Koreas S-Oil has taken its 500,000 tons per year Group III plant in Onsan off line for a scheduled 40-day turnaround, which commenced April 14. The plant was expected to be restarted around May 24.
In China, Sinopec Yanshans 300,000 t/y Group I plant in Beijing was taken off line on April 20 for a 35-day turnaround.
Sinopec Jinan was expected to restart its 150,000 t/y Group II plant in Shandong in early May, following a maintenance shutdown which started on March 15. There was no confirmation whether the plant had restarted.
Chinese Petroleum Corp.-Shell is preparing to shut down its 250,000 t/y Group I plant in Kaohsiung, Taiwan, for maintenance in June, while Formosa Petrochemical will be shutting down its 600,000 t/y Group II plant in Mailiao for 60 days, starting in August.
Upstream, July Brent settled in Asia at $104.30/bbl on May 21, compared to $102.85/bbl for June futures on May 14.
Gabriela Wheeler, based in Japan, can be reached directly at gabriela@lngpublishing.com.