FocusMideast Group I base oils demand seen dropping 50% in July

12 April 2012 05:13  [Source: ICIS news]

By Quintella Koh

Base oils make car engine lubricantsSINGAPORE (ICIS)--Group I SN150 and SN500 base oils demand in the Middle East is likely to halve in July during the Muslim fasting month of Ramadan when demand drops and people work shorter hours, blenders and traders said late on Wednesday.

Ramadan will start on 20 July, and will last for 30 days.

During this period, blenders in the United Arab Emirates (UAE) will be lowering their plant operating rates to around 50% of capacity, the UAE-based market participants said.

Employees in a blending plant usually work from 0800 to 1800 hours but during the fasting month employees work shorter hours from 0700 to 1300 hours.

"This means that blending plants will have no choice but to reduce their operations," a blender said.

Producers and blenders estimate that the UAE can process 2.2m tonne/year of finished lubricants, which implies that the country imports around 183,333 tonnes of base oils each month.

The bulk of base oils imported by the UAE is of the Group I SN500, Group I SN150 and Group I brightstock grades.

Market participants said that because of the anticipated sharp fall in demand starting from early July, they are expecting prices to remain soft sometime in early June.

Group I SN150 and SN500 base oils prices have been increasing sharply since the start of March due to a regional shortage of spot material and competition for the base oils cargoes from Turkey and Africa.

Turkey purchases Group I SN150 and SN500 base oils for producing lubricants while Africa buys Group I SN150 and SN500 base oils for motor oil blending.

“Group I SN150 and SN500 base oils prices will continue to increase in the short-term, but we can expect to see the rate of price increase taper off either at the end of April or in early May,” said a second blender.

Both Group I SN150 base oils prices are poised to hit 23-week highs on the back of strong demand among buyers this week, while Group I SN500 base oils prices are slated to hit a 15-week high this week.

Bids for both Group I SN150 and SN500 base oils have reached $1,150/tonne (€874/tonne) CFR (cost and freight) UAE.

Group I SN150 base oil prices last breached the $1,150/tonne CFR UAE level on 3 November last year, while Group I SN500 base oils prices last breached the $1,150/tonne CFR UAE level on 29 December last year.

($1 = €0.76)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Quintella Koh
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