South African base oil buyers look for lower prices on firmer rand

08 May 2013 16:43  [Source: ICIS news]

LONDON (ICIS)--Base oil buyers in South Africa are hoping for lower prices in reflection of the firmer rand, sources said on Wednesday.

Although many suppliers increased prices in either April or May, an increase in the value of the rand in late April and early May has led several buyers to expect some degree of reversal of this move.

The rand gained around 4.5% versus the dollar in the two weeks from 22 April, before losing some ground.

A weaker rand is often used by suppliers as justification for higher prices in rand terms, as this increases the cost of importing material. Buyers said it is only fair for a stronger rand to result in lower prices.

However, one buyer acknowledged that this would only apply to material imported since the exchange rate changed, and so lower prices will not be seen until current inventories are run down and replaced. If the rand weakens again during this time, any effect on prices will be cancelled out.

With some suppliers having increased prices at the start of May, in reflection of European increases that took place in the first quarter, some buyers have held back from making purchases.

A distributor said offtake had been low this week as buyers try to gain clarification on the likely price developments of the next few weeks before committing to purchases at current price levels.

“Movement [of material] has slowed right down. With the exchange rate, some buyers expect a slight rebate,” said the distributor.

Domestic ex-tank Durban prices are currently assessed at R11.60-12.10/kg ($1,283-1,338/tonne) for SN150, R11.70-12.20/kg ($1,294-1,350/tonne) for SN500 and R12.10-12.40/kg ($1,338-1,372/tonne) for brightstock.

$1 = R9.04

By: Ross Yeo
+44 208 652 3214

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