With Chinese participants away during the National Day holiday on Oct. 1-7, base oil activity was rather subdued in Asia, but some suppliers had high hopes that buyers would return to the market to replenish inventories after the intermission.
Others were less optimistic, given that consumers have been limiting purchases to small cargoes on account of economic uncertainties leading up to the holiday. This trend was not likely to change in the short term, sources added, although recent news about the countrys economic indicators seemed to be more positive. In the past two months, the Chinese economy has actually shown signs of accelerating, according to a Sept. 26 Bloomberg report, with data for monthly retail sales showing that consumption has held up well despite a fall in the trend of industrial production.
The recent slowdown in base oils demand was expected to be counterbalanced by output reductions at several Chinese base oil facilities in October, sources said.
China’s Sinopec Maoming, for instance, has scheduled a 50-day maintenance turnaround at its 400,000 metric tons per year API Group I plant in Maoming starting Oct. 11. Other Sinopec plants had also been undergoing maintenance in September, but should be restarting this week.
However, supply in general was expected to improve in Asia as most facilities elsewhere will be running at normal rates, following routine turnarounds such as the ones seen in South Korea and Taiwan over the last few months.
A South Korean supplier said its inventories were well-balanced and it was shipping product under term contracts to India and other destinations in October, but it did not anticipate having much spot availability through November.
Formosa was expected to restart its Group II base oils plant in Mailiao, Taiwan, which had been down for a two-month turnaround, at the end of September. The producer would strive to meet its term obligations in October, including shipments to India, but was unlikely to entertain spot business until inventories have been built, sources said.
CPC-Shells light vis Group I line in Kaohsiung remains shut down, and the supplier was heard to have imported some SN 150 cargoes of Japanese origin to make up for the production shortfall at the plant, trader sources said.
Taiwanese market participants concurred that demand had been fairly stable, but not particularly strong in August and September, and foresaw a similar scenario for October. There were no jumps in requirements expected to be seen in Taiwan until the end of the year, as the base oils segment is not affected by the oil change season the way the Chinese market is.
Demand from the finished lubricants sector has been lackluster and well below levels observed at the same time last year, especially for industrial applications, due to the economic woes affecting the country, blenders in Taiwan said.
A buyer commented that it had not yet received any firm offers from Korean suppliers, as most sellers appeared to have adopted a wait-and-see approach while assessing the price situation, but were likely to start negotiations in the next few days.
In terms of pricing, market players in Asia expected few changes in October, especially since the pressure coming from the feedstock side has subsided. If anything, buyers hoped that improved availability would allow base oil values to moderate in the next few months.
Prices were assessed as largely stable for the time being, with Group I SN 150 mentioned at $930-$970/t FOB Asia, SN500 at $1045-$1080/t FOB, and bright stock at $1145-$1190/t FOB.
Group II material was heard at $1000-$1050/t FOB Northeast Asia for 150N, and at $1100-$1160/t FOB Northeast Asia for 500N.
Group III cuts were positioned within a price range of $1040-$1080/t FOB Asia for 4 centiStoke and 6 cSt. The 8 cSt cut was assessed at $1020-$1060/t FOB Asia.
On an ex-tank Singapore basis, Group I prices were pegged near $1000-$1090/t for SN 150; SN 500 was assessed at $1090-$1190/t, and bright stock was heard at $1190-$1290/t. Prices varied according to volumes, producer and contract stipulations.
There were several freight inquiries for cargoes moving from South Korea to India this week. Participants conjectured that these were linked to tender business, but further details were unavailable. A 3,200-metric ton parcel of one or two base oil grades was being discussed for Ulsan-Onsan to Mumbai during Oct. 5-10, while a second 1,500-ton two-grade lot was also expected to be shipped from Ulsan-Onsan to Haldia on the same dates. A third cargo of 800 tons was being worked on for Ulsan-Onsan to Chennai on similar dates.
Other inquiries ex-Korea included 1,000 tons of two grades for Ulsan or Yosu to Ho Chi Minh between Oct. 15 and Oct. 31, and a similarly sized cargo from the same origin was being worked on for Merak during Oct. 20-31. A 1,100-ton lot was on the market for Onsan to Yokohama between Oct. 17 and Oct. 21.
Finally, a 3,000-ton parcel was expected to move from Hamriyah to Port Klang on a prompt basis.
In related news, Chinas National Development and Reform Commission (NDRC) slashed domestic gasoline prices by 245 yuan per ton (or approximately $40/ton) and diesel by 235 yuan/ton ($38/ton) on Sept. 30, according to local news agencies. This is the first reduction after three consecutive increases in the previous two months. The NDRC had last increased gasoline and diesel prices by 90 yuan/ton and 85 yuan/ton respectively on Sept. 13.
Upstream, November ICE Brent Singapore futures were trading at $107.87/bbl at the close of the Asian trading day on Oct. 1, compared with numbers at $108.17/bbl on Sept. 24.
Gabriela Wheeler, based in Japan, can be reached directly at Gabriela@LNGpublishing.com.