China’s Growing Taste for Group III


BEIJING – Chinas appetite for high-quality base oils is about to take a giant leap forward, an official at Group III refiner SK Corp. predicted. As a result, Group III 4-centiStoke base stock, in demand for high-quality passenger car engine oils, will be extremely short in the Asian market before the arrival of gas-to-liquid base stocks at the end of the decade.

Yea-Sun Yoon, general manager of Korean refiner SK Corp.s base oil business, told the Fuels & Lubes Asia Conference here on March 16 that growing Asian demand, combined with strong demand in North America and Europe, will result in very tight supplies of Group III 4cSt oils for Asian markets. On the other hand, he predicted that Group II and III 3cSt (used for white oils globally, and in automatic transmission fluids and process oils in the United States) and 6cSt (used for heavy-duty and higher viscosity engine oils) will be long in Asia. Some lighter grades may need new applications to absorb the supply, he said.

There was virtually no commercial market for Group III base oils in the mid-1990s, Yoon said, but demand has increased considerably over the last five years. North Americas Group III merchant market is the largest, at some 2,500 barrels per day in 2004. Asias market, excluding Korea, was a close second, and Europes market was about 1,500 b/d last year.

The global trend is toward higher quality, environmentally friendly base oils, and Asian markets are following that trend. In fact, the increase in high-quality base oil demand, said Yoon, will be highly concentrated in China.

Why? Chinas lube market isover 4 million metric tons per year, and growing rapidly. With automotive lubes making up 54 percent of the total, environmental issues become key. Chinese automotive sales are exploding, with sales of passenger cars leading the growth.

There is tremendous potential for continued growth, Yoon said. For example, there are fewer than two passenger cars per 100 people in China today, compared with 24 per 100 in Korea.

In addition, international automakers are supplying a majority of Chinas passenger car market, so their requirements have a significant impact on lubricants.

At the same time, fuel economy and emissions requirements are becoming tighter. China is expected to follow the lead of Japan, Korea and others in adopting increasingly serious emissions limitations. The result, said Yoon, is that Chinas high-quality base oil market will see substantial growth, sooner rather than later.

While SK plans a leading role in Asias high-end base oil market, Yoon acknowledges that other companies may penetrate the market, and GTL may have a huge impact on the supply side of the market.

Regarding GTL and its impact on Group II and III base oils, Yoon contended that the issue is price. If GTLs price is lower than Group III, it will have a big impact, but that may not happen. GTL may be used as a correction fluid initially.

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