A tight supply/demand balance, particularly for the heavy-vis base stocks, together with strong feedstock costs, continues to underpin stable-to-firm prices in Asia.
While business has been subdued in the last few days as participants have just started to negotiate late September and October shipments, suppliers mentioned they were able to push through increases of about $10-$20/ton on average for spot transactions concluded in August. Sellers underscored that the difficulty in locating spot cargoes of certain cuts has resulted in buyers acceptance of higher prices.
Spot availability was the result of recent and ongoing turnarounds at various facilities in Asia, together with fairly healthy demand for base oils.
Some suppliers were optimistic that demand in India would pick up because of the end of the monsoon season in September, and there were expectations that requirements from Europe would also rise ahead of the winter season.
The arbitrage for exports into the United States and Europe has not been workable in recent months, which obliterates the opportunity to ship extra volumes to these other regions, but suppliers hoped this could change in the next few months.
Most Asian facilities will have resumed production by the end of September, which will likely lead to improved product availability, although participants do not expect this to become evident until late October.
The lighter grades are currently more exposed to downward pressure because availability of these grades continues to be ample, sources said.
CPC-Shell in Taiwan has not restarted its Group I light-vis line, which produces SN150, after completing its annual maintenance in early July because of economic reasons. The heavy-vis line is running at full rates, the producer said, as prices for these products yield better returns. CPC-Shells base oil plant is located at Kaohsiung and has a total capacity of 250,000 metric tons/year. There was talk that the light-vis line may be shut down permanently as the facility is expected to be decommissioned in a couple of years, according to market sources, but this could not be confirmed with the producer directly.
Meanwhile, Formosas Group II plant is undergoing a maintenance program since early August, with the plant slated to resume production at the end of September. Although the Taiwanese producer had built inventories ahead of the turnaround, it is only able to ship product to two or three of its long-term customers, mostly within the domestic market, sources said. The producer does not anticipate any spot availability until at least October.
There continue to be rumblings about quality issues with the new production from the reconfigured SK Lubricants plant in Ulsan, South Korea. Sources said that a 500N cargo manufactured at the plant had changed hands at a very low price near $1000/ton FOB because it had not met the customers specifications, but an SK source said that there were no quality concerns with the product. The producer is still making some adjustments at the plant, which is not running at full capacity yet.
In terms of prices, there have not been significant fluctuations in Asia this week, sources said. Market participants expected September prices to be at similar levels as in August, although higher offers could surface, given the relentless rise in crude oil and feedstock costs seen in the last few weeks.
Group I cuts were heard at $980-$1020/t FOB Asia for solvent neutral 150, $1040-$1070/t FOB for SN500, and $1140-$1180/t FOB for bright stock.
Group II material was mentioned at $1000-$1060/t FOB northeast Asia for 150N, and at $1080-$1150/t FOB northeast Asia for 500N.
Group III volumes were heard within a price range of $1010-$1060/t FOB Asia for 4 centiStoke, 6 cSt and 8 cSt grades, although prices for smaller parcels of around 500 tons or less carried a premium of at least $100/ton.
On an ex-tank Singapore basis, Group I prices were assessed near $1040-$1100/ton for SN150, $1080-$1180/t for SN500 and $1180-$1290/t for bright stock. Prices varied according to volumes and other contract stipulations.
On the shipping front, 5,000 metric tons of base oil were under discussion to cover Kainan-Mizushima to Hong Kong and Singapore during Sept. 15-19. A 1,400-ton lot was expected to make its way from Onsan to Yokohama during Sept. 13-16, while 1,000 tons were likely to be shipped from Sriracha to Ulsan in the first half of September.
Upstream, October ICE Brent Singapore futures were trading at $110.97/bbl at the close of the Asian trading day on Aug. 27, compared to numbers at $109.01/bbl on Aug. 20.
Gabriela Wheeler, based in Japan, can be reached directly at Gabriela@LNGpublishing.com.