Buyers and sellers are negotiating November and December shipments in Asia, but transactions were limited by the Diwali holidays in several countries, and by the large gap between buying and selling indications.
Sellers said that buyers were pushing for lower prices as they were aware that availability had started to exceed demand, and bids were at least $10-20/metric ton below offers.
Some suppliers have delayed communicating their offers as long as possible, while others said they had just started discussions for spot business, but did not expect to finalize any deals until later in the week.
A Northeast Asian supplier admitted that demand from Southeast Asia had declined, as consumers were in possession of hefty inventories and were reluctant to acquire additional material as demand from downstream applications was not expected to pick up substantially before the end of the year.
At the same time, a second supplier said that supply/demand was balanced, and acknowledged that some refiners have started to control how much base oil they produce, as any inventories left at the end of the year impacts their working capital. The producer said many refiners were largely producing to meet term contracts and that this was limiting the spot availability.
The supplier also underscored that despite recent fluctuations in crude oil and feedstock prices, margins continued to be squeezed and that there was no room for base oil prices to drop further.
Meanwhile, a Taiwanese supplier of bright stock has acquiesced to decreases for November shipments to China, sources said. The producer has reduced its prices by $10-20/ton, in line with the decreases that had materialized for other grades over the last couple of weeks.
Until recently, some of the high-vis cuts and bright stock appeared to be immune to the downward pressure, as supply of these cuts remained tight, but a lengthening market and reduced pressure from the feedstock side have led to decreases for almost all grades, sources added.
The Taiwanese producers API Group I SN150 production line in Kaohsiung was shut down earlier this year during maintenance work at the site, and is likely to remain off-line permanently, while production of SN500 and bright stock is proceeding normally, market sources said.
In China, recently concluded business has been reported at decreases of around $10-20/ton, and further discounts are likely as supply is growing. Several local producers such as Sinopec have either increased production or have resumed output, following planned and unexpected shutdowns, and a number of cargoes of Russian origin are also anticipated to arrive in November.
New capacity from projects such as S-Oils revamping of its base oil plant in Onsan, Korea, should add an additional 3,000 barrels per day (approximately 150,000 tons per year) of Group II+ and Group III to the existing supply in mid-November.
Chinese producer Panjin Northern Asphalt was performing test runs at its new 400,000 t/yr Group II plant at Panjin this month as well, sources said.
There was further evidence of a slowdown in activity in Asia by the dwindling number of inquiries surfacing on the shipping front. Only about three inquiries were heard, one of them rolling over from the previous week. A 5,000-5,500-metric ton cargo was being discussed for Hong Kong to Zhuhai, Zhapu and Tianjin between the 25thand 29thof November. A 3,300-ton lot comprised of three grades was likely to cover Mailiao to Mumbai between Nov. 21-27. A 2,300-ton parcel of four grades was still being negotiated for Ulsan or Yosu to Merak from Nov. 20-30.
In India, prices continue to see some deterioration, and the arrival of several parcels of U.S. product have resulted in increased base oil availability within the country. Local producers have lowered some of their domestic selling indications for Group I and II cuts as of Nov. 1, sources said.
Elsewhere, there were few fluctuations noted in Asia this week, following a $10-20/ton downward adjustment on several cuts observed last week.
Group I cuts were assessed unchanged at $930-$970/t FOB Asia for SN150 and at $1050-$1080/t FOB for SN500. Bright stock was slightly lower by $10/ton at $1140-$1180/t FOB.
Group II material was steady at $980-$1030/t FOB Asia for 150N, and $1100-$1150/t FOB Asia for 500N.
Group III prices were largely stable, with numbers heard at $1040-$1080/t FOB Asia for 4 cSt and 6 cSt, and $1020-$1060/t FOB Asia for the 8 cSt cut.
On an ex-tank Singapore basis, Group I prices were said to be assessed at around $990-$1080/t for SN150; SN500 was heard at $1090-$1190/t, and bright stock at $1190-$1290/t. Prices varied according to volumes, producer and contract stipulations.
Upstream, December ICE Brent Singapore futures were trading at $106.29 per barrel at the close of the Asian trading day on Nov. 5, compared with numbers at $109.34 per barrel for November futures on Oct 29.
Gabriela Wheeler, based in Japan, can be reached directly atGabriela@LNGpublishing.com.