FocusUS wax prices likely to move up on tight supply

10 December 2009 17:41  [Source: ICIS news]

HOUSTON (ICIS news)--US wax prices could move up again before the end of the year due to tight supply as Group I base oil production trends down, sources said on Thursday.

Buyers said that ExxonMobil issued a 3 cents/lb ($66/tonne or €44/tonne) price hike for all grades of wax, effective 15 December. Other US finished wax sellers including IGI and Calumet have not yet made a December announcement.

Finished wax is fully refined to get most of the oil out of it, and used in candles, packaging, board sizing, surface applications and pharmaceutical industries.

The last round of finished wax hikes took place at the end of October/first of November, depending on supplier, bringing 125-140°F (52-60°C) fully refined liquid wax spot prices to $1,382-1,486/tonne, according to data from global chemical market intelligence service ICIS pricing.

Meanwhile, the last round of base oil hikes took place in July as sellers struggle to maintain market share against weak demand.

“Without any base oil hikes, refiners will choose to quit making base oils or limit production further the rest of the year,” a wax seller said. “As wax is a by-product of Group I base oils, this hurts the overall US supply situation and drives up wax prices.”

Paraffinic base oil volumes dropped 25% during the first half of the year, as base oil producers recorded the lowest operating rates since 1983, according to data from the Energy Information Administration (EIA). Wax production during the first half of 2009 was 45% less than that of the first half of 2008.

The US supply of paraffin wax will remain tight, as production of paraffin wax in the past few years has been in decline. Several Group I base oils refineries, where wax is produced as a co-product, have shut amid poor economics.

The base oils industry has steadily moved to higher quality and more competitive group II/III refineries where no wax is produced.

US wax consumers depend on Asia supplies, where over 45% of world supply is now produced.

“Import tanks in the US Gulf are empty, and that is adding more pressure to domestic prices,” a trader said.

($1 = €0.68)

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By: Heather McGuire Doyle
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