FocusAsia’s Group II base oils to stabilise in Q3

28 June 2013 05:36  [Source: ICIS news]

By Whitney Shi

Asia Group II base oils seen stable in Q3 on low supply, weak demand SINGAPORE (ICIS)--Asia’s spot prices of Group II base oils are expected to stabilise in the third quarter as low supply from heavy turnaround schedules is expected to be countered by falling demand from downstream lubricants companies, industry sources said on Friday.

Two major Group II base oils producers in northeast Asia will cut their base oils exports in July-August as they have planned heavy turnaround schedules.

South Korea’s S-Oil is planning to shut its 1.02m tonne/year Group II base oils plant at Onsan for a month-long maintenance starting from early July, a company source said.

Taiwan’s Formosa Petrochemical Corp (FPCC) plans to start a two-month turnaround at its 600,000 tonne/year Group II base oils plant at Mailiao, a source from the company said. The turnaround will begin from early August, the source added.

The two companies are expected to cut Group II base oils exports to China by a combined 20,000-30,000 tonnes in July-August, market sources said.

In addition, two base oils plants in China will be taken off line in the third quarter for maintenance - Hainan Handi Sunshine Petrochemical’s 300,000 tonne/year Group II base oils plant and PetroChina’s Daqing Refining & Chemical’s 200,000 tonne/year plant, according to refinery sources.

Hainan Handi Sunshine Petrochemical supplies most of its Group II base oils to the domestic markets and moves a few spot cargoes to Asia and Europe.

Daqing Refining & Chemical will shut its 200,000 tonne/year Group II base oils plant for a 35-day turnaround from early August.  

The turnarounds at these two plants will cause a supply drop of about 30,000 tonnes per month in the spot market.

However, the operation of a new base oil plant in South Korea is expected to partly make up for the loss of supply caused by the turnaround shutdowns.

SK Energy will start up a new 300,000 tonne/year Group II base oils plant in late June and most of its output will be supplied to the Asian market, market sources said.

But its volumes may not be able to fill the supply void, a Chinese importer said.

In addition, although the product from SK Energy will have high viscosity and its specifications can completely meet the requirements of Chinese buyers, a 6% tariff that China imposes on such imports from South Korea will curb demand from Chinese buyers, according to the importer.

SK Energy will supply in July its first Group II base oils cargo from the new plant to a large foreign-funded lubricants company in China. Thus, the China spot market will remain tight in July and prices of Group II base oils imports are likely to see some uptrend, market sources said.

As for demand, the global base oils market will head into a low season in July and through to early or mid-August. Downstream lubricants companies and base oils importers will cut their buying interest in the period.

A demand recovery from lubricants companies is not expected to come until late-August when some of these companies start to build base oils stocks in preparation for the autumn peak season for lubricants consumption.

Turnaround Schedule of Group II Base Oils Plants in Asia

Country/Region

Refinery

Shutdown capacity

Shutdown date

 Restart date

China

Hainan Handi Sunshine Petrochemical

300,000 tonnes/year

1 July 2013

Late September 2013

South Korea

S-Oil

1.02m tonnes/year

Early July 2013

Early August 2013

Taiwan

FPCC

600,000 tonnes/year

Early August 2013

Late September 2013

China

Daqing Refining & Chemical

200,000 tonnes/year

5 August 2013

10 September 2013

Source: ICIS C1 Energy

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


By: Whitney Shi
+65 6780 4359



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