Russia base oil exports into EU to be impacted by higher duties

03 December 2013 17:39  [Source: ICIS news]

LONDON (ICIS)--The volume of Russian base oils arriving into the EU next year is likely to be impacted by an approaching increase in import duties, from 0% to 3.7%, a trader said on Tuesday.

The EU has decided that Russia no longer qualifies for the Generalised Scheme of Preferences (GSP) that gives developing countries preferential import duty rates, and as such imports from the country will subject to the higher duties.

The trader said that unless European buyers are willing to pay higher prices for Russian imports then Russian exporters will either have to absorb the cost of the duties themselves or focus exports on other destinations, such as west Africa, already a large buyer of Russian base oils.

One reason that European buyers are unlikely to accept higher prices is that the European market is fairly weak at the moment, with sluggish demand and adequate domestic supply.

Another reason is that Europe is set to receive large volumes of Group II base oils in 2014 that are expected to be competitively priced to Group I.

Producer Chevron is building a Group II plant in Pascagoula, Mississippi, in the US, and significant volumes are understood to have been earmarked for Europe. The company has said commercial output should commence by the end of the first quarter in 2014.

This influx of higher quality, competitively-price base oils is expected to put pressure on European Group I prices, which will create an even more competitive environment for Russian imports.

The trader added that it believes refinery closures in both Europe and Russian are a possibility next year as a result of the increased competition.

By: Ross Yeo
+44 208 652 3214

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