12 November 2008 04:49 [Source: ICIS news]
By Anu Agarwal
SINGAPORE (ICIS news)--Asian base oils have gone back to where they started this year, tracking the movement of global crude oil prices amid slowing regional demand, Asian buyers and sellers said on Wednesday.
Export prices of Group I and II 150 neutrals were hovering at $830-930/tonne FOB (free on board) Asia on Tuesday, levels last seen in the beginning of 2008 and sharply lower than the $1500/tonne FOB Asia mark seen not too long ago in the third quarter.
These prices reflected offers from Asian base oils producers in southeast Asia, ?xml:namespace>
Offers for brightstock, the heavier grade of base oils used for making marine lubes and the one whose supply had been tight this year, also fell to $1,350-1,400/tonne FOB
A big drag on base oils prices came from
“Chinese buying has dropped nearly 60-80% during October and November,” said a regional producer, adding that Indian buying has also fallen some 20-30%.
Producers were stuck with high inventories, with several Asian refineries now either considering production cuts or already trimming output.
“There is continued difficulty in finding customers as the Chinese don’t want to discuss prices,” said a key northeast Asian producer.
“There is no point giving offers to customers these days as there seems no interest in buying,” said a base oils importer and trader.
“With the automotive manufacturing plants in India cutting production, finished lube sales are down as no one wants to keep stocks,” said an Indian base oils producer.
Other factors associated with the global credit crisis that had made opening and confirming letters of credit (LCs) difficult, had also slowed down trades, said some Indian base oils buyers.
What was not clear was how much of this slowdown was the effect of destocking and how much was due to the real slowdown in demand from the finished lubes sector, said some market players.
“We see some export business returning after base oils prices dropped,” said a large southeast Asian blender with regards to exports of finished lubricants.
But even now, most end users are running down old stocks and do not want to keep any inventory, he added.
Some base oils producers said they were hopeful that current price levels might bring demand back and help stop the downward spiral in values.
“At around $850/tonne FOB
Others, however, were not so certain that a bottom had been reached. The real effects of demand slowdown were still being felt and could drag down numbers lower in the coming weeks, some said.
New capacities of base oils in Asia like the recent start up of Petronas’s 300,000 tonne/year base oils refinery in
Nearly 60% of the production from Petronas is intended for exports to the
Base oils are used for producing automotive, marine and industrial lubricants.
Key Asian producers include Exxon Mobil, Shell,
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