Asia Base Oil Price Report


Asia base oil suppliers have been keeping an anxious eye on the supply/demand balance in the region, as increased availability could bring about softening of base stock prices.

Most producers have now restarted their plants following recent turnarounds, and given that regional demand is not expected to increase significantly over the next two to three months, suppliers are concerned about the market becoming long on product.

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Formosa restarted its Group II base oils plant in Mailiao, Taiwan, at the end of September, following a two-month turnaround. The supplier plans to increase its shipments to term customers in China to around 25,000 metric tons in October, resuming its regular monthly amount before the turnaround. In September, Formosa was only able to ship about a third of that amount to China, market sources said.

In China, sources said that Sinopec Shanghai Gaoqiao had restarted its 400,000 tons per year Group I and 300,000 tons per year Group II plants on Oct.10, following an unexpected shutdown which was apparently triggered by a power supply outage in late September.

Also in China, Panjin Northern Asphalt was expected to start up a new 400,000 ton per year Group II plant at Panjin in November, according to local sources. The company had announced in 2010 that it was starting construction of a one million ton per year crude distillate unit at the site, and was pursuing the expansion of its base oils business because of Chinas drive to increase production of quality Group II base stocks, market sources added.

Meanwhile, South Korean suppliers, who had completed turnarounds in the second and third quarters, were also shipping their regular volumes to various destinations in Asia, although at least one supplier said its balanced-to-tight position on Group II heavy-vis grades and Group III cuts was curbing its offers of spot cargoes in October and November.

This week, business was generally thin in Asia given the Hari Raya Haji and Eid-ul-Adha holidays observed in several countries, but discussions for spot shipments were anticipated to pick up following the holidays.

A South Korean producer said that it expected requirements in October and November to be similar to those seen in September, but buyers have been hoping to achieve lower prices, especially since crude oil prices have come down from sky-high levels in August and September.

However, base oil producers underscored that margins were still lean as crude oil and feedstock prices have not decreased substantially and remained very volatile, falling one day and climbing the next.

In India, several cargoes of U.S. origin are due to arrive or have already been received at Indian ports. The parcels were heard to have changed hands at competitive prices very close to cost, as U.S. sellers were eager to find an overseas home for their products because domestic demand has started to slow down.

Furthermore, several Korean cargoes made up of Group II and III grades were also anticipated to be entering the Indian supply system over the next few weeks.

A southeastern Asia producer said it had offered some cargoes to Indian buyers, including about 2,000 metric tons of Group III 4centiStoke material, but faced difficulties in competing with other imports. The seller was not particularly worried because it had limited availability to offer and expected to find takers in China instead, but hoped the downward price trend in India would not be long-lived. However, the seller also said that Group III spot prices into China have slipped by about $20/ton since September.

In general terms, Group I prices in India were assessed at $970-$990/ton CFR India for SN150, at $1000-$1020/t CFR for SN500 and at $1150-1180/t CFR for bright stock.

Within Group II, prices were heard at $1000-1050/t CFR India for 150N, with some business heard concluded at $1010/t CFR this week. Prices for the 500N cut were mentioned at $1142-1160/t CFR; this grade seemed to be holding better than the light-vis grades, according to sources.

While prices in India have come down from September levels, prices in other countries in Asia have been holding fairly steady, or have inched up since the end of last month. This week, however, prices were understood to be fairly stable.

Group I cuts were assessed at $930-$970/t FOB Asia for SN150, at $1050-$1080/t FOB for SN500 and at $1150-$1190/t FOB for bright stock.

Group II material was heard stable at $1000-$1050/t FOB Northeast Asia for 150N, and at $1100-$1160/t FOB Northeast Asia for 500N.

Group III cuts were holding at $1040-$1080/t FOB Asia for 4 cSt 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 assessed at around $1000-$1090/t for SN150; SN500 was heard at $1090-$1190/t, and bright stock was heard at $1190-$1300/t, reflecting a $10/ton hike at the low end of the range. Prices varied according to volumes, producer and contract stipulations.

In production news, Petronas announced that it would defer the planned upgrade to its base oils plant in Melaka, Malaysia, due to the uncertain market outlook. (See story in this issue of Lube Report.)

Activity was brisk on the shipping front, with 4200 metric tons of base oil expected to be shipped form Hong Kong to Yokohama during Nov. 11-15, and 3,000 tons still being discussed for Yokkaichi-Tianjin around Nov. 14-18.

A 1,000-ton parcel was on the market for Yosu to Dongguan in the second half of October, and a second 7,250-ton lot was being worked on from the same origin to Mumbai during Oct. 20-30. A 3,000-ton cargo was expected to be shipped from Ulsan to Taicang during Oct. 18-25, and a second 2,000-ton parcel was expected to cover Ulsan to Hamriyah during Oct. 20-30. A third cargo consisting of 800 tons was also being worked on for Ulsan to Chennai during Oct. 20-30.

A large 6,000-7,000-ton parcel was also being quoted for Hamriyah to Yanbu for October dates.

Upstream, November ICE Brent Singapore futures were trading at $110.99/bbl at the close of the Asian trading day on Oct. 15, compared with numbers at $109.82/bbl on Oct 8.

Gabriela Wheeler, based in Japan, can be reached directly at

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