Credit lines strained for lubes market

13 October 2008 23:37  [Source: ICIS news]

SCOTTSDALE, Arizona (ICIS news)--Lubricants distributors are reaching the limits of their credit lines due to price increases, a seller said on Monday.

“Finished lubricant prices are up more than 60% from one year ago,” a distributor said on the sidelines of the Independent Lubricant Manufacturers Association (ILMA) annual meeting (ILMA). “The increases mean our credit reached its limit before the year is even over. Many of us are actually struggling to get enough credit to cover the same volume purchased last year.”

The finished lubricants market issued price increases due to the surge in crude and base oil prices in January and again in May, increasing prices by around 42 cents/gal each time, the distributor said.

“There had not been any price increases in 2007,” the distributor added.

As crude continued its surge in July, the majors issued an 85 cents/gal (€63/gal) increase and then followed with an increase of nearly $2/gal in September.

Distributors have had a hard time absorbing the increases.

“We will just have to stop buying in some cases,” the distributor said.

In other cases, distributors have aimed at finding different suppliers.

“We have filled orders from customers we have not talked to in several years,” one major seller said.

Nearly 80% of lubricants consumed in the US are delivered by distributors, according to data from ILMA.

Finished lubricants, blended with additives, are the downstream product of raw material base oils.

The price of feedstock crude oil skyrocketed to a high of $147.27/bbl in July, elevating the posted price for ExxonMobil’s Group I, 250- grade base oil by 68% to $5.19/gal from the same time last year, according to global chemical market intelligence service ICIS pricing.

($1 = €0.74)

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By: Heather McGuire Doyle
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