Contrary to recent signs indicating that base oils prices were softening in Asia, and particularly in China, spot ideas for the high viscosity API Group II cuts received a boost from tightening conditions this week.
At least two spot cargoes were heard concluded by a northeast Asian supplier into China at a $20/ton increase above benchmark prices, although specific numbers were not forthcoming. The two 2,000 metric ton combination cargoes of 150N and 500N were concluded for late June and early July arrival, respectively. The prices were heard to be near $1,010/t CFR China for the 150N and $1,070-$1,080/t CFR China for the 500N, although this could not be confirmed.
A 1,000 ton Group I bright stock cargo of Russian origin was also heard concluded into China earlier in the week.
The snug supply/demand balance affecting the market was attributed to recent, ongoing and upcoming turnarounds in Asia, which have forced several suppliers to withdraw from the spot market amid an increase in spot inquiries from buyers in China and Southeast Asia.
A South Korean producer whose Group III plant underwent a turnaround in April/May is expected to start a one-month maintenance shutdown at its Group I/II plant in July. The producer is currently unable to offer any spot cargoes and does not foresee any spot availability until September.
A second Korean supplier was also heard to be in a tight supply position and is not offering spot cargoes at the moment.
A Taiwanese producer whose plant will be taken off-line for maintenance in August and September is building inventories to be able to meet term contract obligations during the outage. The producer expects to ship only half of its regular monthly shipments to China in July, or approximately 20,000 tons, while the quantities will be further reduced to a third of its normal monthly volumes in August and September.
A second Taiwanese producers base oils plant is currently undergoing a turnaround, and the supplier is not offering any spot cargoes.
While initial discussions for July base oil shipments have just started, suppliers expected to finalize more business at an industry event taking place in Singapore on June 26-27. Producers were hoping to be able to implement moderate increases for July spot shipments, but were likely to face buyer resistance.
As far as base oils prices are concerned, indications for Group I material on an ex-tank Singapore basis were assessed as stable at $1060-$1100/t for SN150, $1120-$1180/t for SN500 and $1210-$1260/t for bright stock this week.
On an FOB Asia basis, prices were heard 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 $980-$1030/t FOB NE Asia for 150N and at $1060-$1110/t FOB NE Asia for 500N, up by $10-20/t from the previous week, according to sources.
Group III spot prices were largely stable within a $1030-$1080/t FOB Asia range for 4 cSt, 6 cSt and 8 cSt cuts, but some indications continued to be mentioned above $1100/t FOB Asia for small-volume transactions.
In production news, Chinese Petroleum Corp.-Shell is expected to restart one of its Group I production lines at Kaohsiung at the end of the month or first week of July, following yearly maintenance. Most term obligations were being met as scheduled, as the supplier had built stocks ahead of the outage, but no spot cargoes were available through July.
S-Oil will be shutting down its Group I/II facilities in Onsan, South Korea, in July for routine maintenance, according to industry sources. The units are likely to be off-line for slightly more than a month. The producer had completed a turnaround at its Group III unit in early May.
SK Lubricants is scheduled to start up a 300,000 t/y Group II base oil plant in Ulsan, South Korea, around June 25. The Group II converted production train at the facility will produce high viscosity 500/600N cuts only, and is initially expected to be run at reduced rates.
Thailands Integrated Refinery & Petrochemical Complex (IRPC) shut down its 60,000 t/y Group I base oils plant in Rayong for maintenance this week, sources said. IRPC produces Group I SN150, SN500 and bright stock.
On the shipping front, a few inquiries surfaced this week. A supplier was hoping to book space for 3,500 metric tons of two base oil grades from Yosu to Chennai during July 1-6. A second combination cargo of two grades for a total of 1,900 tons was being worked on to cover Onsan to Singapore during June 25-30. A 1,000 ton cargo of SN500 was discussed for prompt shipment from Sriracha to Nantong.
Upstream, August Brent settled in Asia at $105.18/bbl on June 18, compared to July numbers at $103.49/bbl on June 11. Prices were up week-on-week, but down from the previous session on speculation that the U.S. Federal Reserve may decide to rein in its stimulus plans.
Gabriela Wheeler, based in Japan, can be reached directly at gabriela@lngpublishing.com.