25 September 2012 23:59 [Source: ICIS news]
LONDON (ICIS)--Ongoing low demand for finished lubricants is limiting European base oil price increases, market sources said on Tuesday.
High crude oil and vacuum gasoil (VGO) prices upstream have encouraged base oil producers to seek increased prices for their products, as they bid to ease squeezed margins.
However, downstream demand in the finished lubricant sector is hampering these attempts.
The European export and domestic markets are fairly stagnant, with only modest upward price movement seen on certain grades, amid low trading.
“It is a bit boring,” said a southern European producer.
“It is a strange market. People are asking for product but it is not moving.”
This lacklustre offtake is evidenced by the latest statistics from the European Automobile Manufacturers’ Association, which showed that new passenger car registrations were down by 8.9% in August year on year, and down 7.1 % year on year for the first eight months of 2012.
Fewer new cars means lower lubricant consumption, which supports talk of an ongoing sluggish market.
“It [finished lubricant demand] is still the toughest part of the business. That is what’s holding everything back,” said a northwest European base oil buyer.
“I have never known it really so quiet. It is amazing really,” another base oil buyer said. “I think the outlook for demand is so uncertain.”
A southwest European producer said: “It [demand] is low, definitely. Most of the clients are not ready to commit. They are checking prices and then they do not go forward.”
The restriction on price increases means that certain producers will continue to cut base oil rates as they face squeezed margins, while some may look to use feedstocks in alternative products, such as diesel, because of the better margins on offer.
However, one producer pointed out that numerous turnarounds scheduled in northwest Europe during September and October could support prices.
European SN150 and SN500 export prices were both assessed up $15/tonne (€12/tonne) to $1,025-1,050/tonne FOB (free on board) Europe and $1,040-1,060/tonne FOB respectively, by ICIS this week.
European SN150 and SN500 domestic prices were assessed up $5/tonne to $1,180-1,215/tonne FOB northwest Europe (NWE) and $1,200-1,230/tonne FOB respectively.
($1 = €0.77)
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