There was subdued activity in the Asia base oils market as a few remaining December cargoes were being finalized and January shipment discussions were not expected to start until later this week.
A majority of December spot business was concluded at a decrease of between $10 and $30 per metric ton into some destinations such as Southeast Asia and India, sources said, as growing supply against weakening demand was prompting suppliers to grant discounts over November prices.
The decreases were particularly evident in India, where the arrival of U.S.-origin cargoes at very competitive levels had placed downward pressure on prevailing import values and had driven local producers to lower domestic prices in mid-November as well.
Furthermore, demand in India remained lackluster, partly because buyers were cautious about acquiring large quantities as they expected further price drops.
Asian suppliers vied to capture the few inquiries that surfaced from Indian buyers, but conceded that consumers price ideas were difficult to match.
A Northeast Asian producer concluded a total of approximately 7,000-8,000 tons into India, and conceded that the price was lower than in November due to the competition with U.S. material and weak downstream demand. The API Group II December cargoes were heard to have been finalized at $1050-$1060/ton CFR Mumbai for 150N and $1130-$1140/ton CFR for 600N. The customers who lifted over 2,000 tons received a $30-$40/ton volume discount, which put their prices in line with those of deep-sea cargoes.
Meanwhile, export business into China was heard to be brisk, with some suppliers actually increasing the volumes shipped in December as compared with November shipments.
A Taiwanese producer has agreed to ship around 40,000 tons of Group II base oils to China in December, up by over 5,000 tons from volumes concluded in November, to meet both contract and spot requirements. The supplier said it was able to supply more cargoes to China as its plant was running well and demand from other markets such as India had declined. Part of its production will also be shipped to several destinations in Southeast Asia.
The supplier has not started January negotiations yet, but expects to do so in the next few days. Appetite for January tonnage in China is anticipated to pick up as buyers will have depleted inventories at the end of the year and will need to replenish them, the seller conjectured.
The Lunar New Year will be celebrated at the end of January and Chinese buyers will likely try to finalize orders before the holidays, the supplier added.
In the domestic market in Taiwan, demand has slowed down as requirements from downstream applications have weakened on economic uncertainties. A buyer said it had received base oil offers from several suppliers, namely Korean producers, who were eager to place product for December shipment, but the buyer was trying to control its inventories and was therefore not eager to acquire more cargoes. However, the buyer confessed that if suppliers offer a good price, I may consider buying.
A second buyer said it had been difficult to locate Group II high-vis cuts earlier in the year, but now producers were able to supply almost any grade-a sign that availability was outpacing demand.
In Southeast Asia, base stock buying interest has been lackluster at best, sources said, as requirements from the lubricants sector have slowed down. Prices are under pressure, particularly in the Group I segment, and there could be some downward adjustments in the next few weeks, as buyers were unwilling to accept current offer levels given the perception that availability is plentiful, sources added.
Prices in Asia were assessed as flat this week, after undergoing moderate decreases between $10-$30/ton the previous week. Within the Group I segment, SN150 was heard at $920-$970/t FOB Asia, SN500 at $1020-$1050/t FOB Asia, and bright stock at $1130-$1170/t FOB Asia.
Group II material was mentioned at $970-$1030/t FOB Asia for 150N, and $1090-$1140/t FOB Asia for 500N.
Group III prices were holding at $1030-$1080/t FOB Asia for 4 cSt and 6 cSt, and $1010-$1060/t FOB Asia for the 8 cSt cut.
On the shipping front, inquiries to ship cargoes ex-Korea again moved to center stage, with a 3,500-metric ton cargo of three base oil grades being discussed from Yosu to Nantong and Jiangyin during Dec. 11-17. A 2,500-ton parcel of two grades was expected to be shipped from Yosu to Tianjin between Dec. 16 and 20. A 1,500-ton lot, also composed of two grades, was on the table for Ulsan or Yosu to Merak during Dec. 20-31, while a large 8,400-ton parcel of three grades was being worked on for Ulsan or Yosu to Sharjah, for first half Dec. shipment and Dec. 30-Jan. 15 delivery. A second 1,500-ton cargo of two grades surfaced for Ulsan to Sharjah for Dec. 10-25 lifting. A 3,500-ton lot of two grades was likely to move from Ulsan or Yosu to Mesaieed during Dec. 10-25.
Finally, a 1,000-ton parcel was being discussed for prompt shipment from Karachi to Mumbai.
In other news, several Thai companies headquartered in Bangkok were forced to close their doors as protests against Prime Minister Yingluck Shinawatra and her government became violent in the Thai capital over the weekend, resulting in four deaths, according to local media reports.
Upstream, January 2014 ICE Brent Singapore futures were trading at $111.58 per barrel during the Asian trading day on Dec. 3, compared with numbers at $110.62 per barrel on Nov. 26.
Gabriela Wheeler, based in Japan, can be reached directly atGabriela@LNGpublishing.com
