Some – but not all – lubricant blenders in East Africa are increasing finished product prices this month based on fluctuating currency exchange rates and rising costs of packaging materials, industry sources told Lube Report.
The instability of local currencies, which affects feedstock importation, is a primary reason for the price hike, according to Irfan Khan, general manager for General Petroleum Ltd. The Dar es Salaam, Tanzania-based branch of the German company informed customers that it will raise lubricant prices in the last week of June.
We [had been] importing base oils at better prices, but it seems our [importation] costs now exceed the cost of production, especially with the local currency fluctuation, Khan told Lube Report. In the last six months, the exchange rate for U.S. $1 has jumped from 1,650 Tanzanian shillings to 2,200 shillings.
Local manufacturers of packaging materials have also announced price increases, Khan said. Another fact is that we have received notice from local manufacturers of packaging material that they will hike their prices of packaging materials by 15 percent to 20 percent.
Gulf Energy Ltd., of Kenya, will also raise its prices. We certainly will increase lubricants prices, mainly because of the exchange rate, the companys lubricants sales manager, Richard Mugambi, told Lube Report. The Kenyan shilling has significantly depreciated against the U.S. dollar.
Kenya has no base oil plants, so blenders must import all of their base stocks. Base oil transactions are usually conducted in U.S. dollars.
Unlike General Petroleum and Gulf, Kenyas KenolKobil has not decided to raise prices. We are not planning any price increases at the moment because when base oil prices crashed last year, we did not lower prices across the board, Kenolkobil Petroleum Manager James Mutisya told Lube Report. We lowered [prices for] only the
that were significantly out of the market range. So for the moment even as base oil prices rise, we are not planning a blanket price increase.However, that may change later this year, Mutisya added. When we take delivery of third quarter 2015 base oils stocks by September, the price difference may be significant.