MOSCOW – Driven by strong demand for premium products, China imported a record 2.7 million tons of base oil last year, continuing a six-year trend during which base oil imports grew by nearly 1.8 million tons.
Chinas average annual demand for lubricants and greases grew by 7 percent over the past decade, and is anticipated to grow another 4 percent in the next five years, according to Frank Ye, an analyst at the Beijing consultancy Chem1.
In 2011 China consumed 7.1 million tons of lubricants, up from 6.8 million tons in 2010, Ye observed. The growing automotive sector and industrial development are driving the demand for lubricants.
In 2010 diesel and gasoline engine applications consumed around 50 percent of countrys finished lubricants. The processing industry, including metal processing, consumed 25 percent. Machinery and machine building consumed 18 percent, while 6 percent went to other transportation.
In 2011, auto lubricant consumption rose to 54 percent from 51 percent in 2005, with diesel engines accounting for the greatest share, Ye told the WRA Base Oils and Lubricants in Russia and the CIS conference March 30.
From 2000 to 2010, average annual vehicle production grew about 20 percent per year, making China the biggest car maker in the world. Ye said China produced 18 million vehicles in 2011.
Chem1 said Chinas annual average lubricants and greases production growth rate over the past decade was 11 percent, and it will remain 4 percent in the following years. In 2011 China produced 8.3 million tons of lubricants. And we expect it to produce almost 10 million tons of lubricants and greases by 2015, Ye said.
Chinas biggest finished lubricants suppliers are PetroChina and Sinopec, which together hold around 35 percent share of the market. They are followed by Shell and ExxonMobil, which hold 8 and 4 percent market shares, respectively. BPs Castrol brand holds 1 percent of the market. The remaining 52 percent is supplied by independent lubricant marketers.
More than a half of Chinas lubricants supply comes from independent blenders who dont have their own base oil production, and have to buy or import base oils from such destinations as South Korea, Taiwan, Singapore or Russia, Ye said, adding that there are around 400 independent blenders in the country.
Base Oils
While Chinas base oil supply-demand gap continues to increase, it is covered by imports, according to Chem1. In 2011 Chinas base oil supply was 4.5 million tons, while demand was 6.7 million tons. The supply-demand balance for 2010 was 4.4 and 6.4 million tons, respectively.
Around 30 percent of the base oil supply in the country depends on imports, and import share grows rapidly, Ye emphasized. For example, China imported 2.7 million tons of base oils in 2011, or 600,000 tons more compared to 2010. Chem1 expects Chinas base oil imports to reach 3.3 million tons by 2015.
PetroChina and Sinopec are the dominant base oil marketers in China. In 2011 PetroChina produced almost 3.5 million tons of base oils, while Sinopec produced around 1.6 million tons.
Russia exported around 150,000 tons of base oil to China in 2011, or 30,000 tons more compared to the year before. The Russian product is mainly API Group I grade, and the export price is lowest compared to the prices of other exporters. While more than 80 percent of the Russian base oil flows into Inner Mongolia mainly by railway, the main consumption regions are Eastern and Southern China, Ye said. In 2011 the average price for Group I base oilimported from Russia amounted to $1,100 per ton, while average prices of the Singaporean or Korean base stocks sold in China were around $1,400 per ton.
The quality requirements for lubricants in China are increasing, with high viscosity index, low sulfur, low volatility, low pour point, high anti-oxidative stability and high additives response as main characteristics. The consultancy expects base oil products to change with Group II and Group III demand increasing rapidly.
There will be good opportunities for base oil exports to China when Russia increases its Group II and Group III capacity from its current 40,000 to 1.33 million tons, Ye added.
A successful portfolio for every marketer in China will include a total package of Group I, II and III base oil offers and solved transportation and marketing channels in East and South China,the main consumption regions, he said.
Chinas economy showed steady growth in the past decade, and it is now the biggest manufacturer in the world. Its gross domestic product last year was nearly $7 trillion, a 9.2 percent increase from 2010, according to the CIAs World Factbook. The GDP per capita in 2011 was $8,400 and its population is about 1.35 billion. China is becoming a very important consumer market in the world, Ye said.