Base Oils: Commentary

12 February 2014 12:08  [Source: ICB]

Base oil producers experienced soft market conditions in 2013 and go into 2014 with only slight hopes of improvement. Prices have, by and large, been flat and supply more than adequate, leading many commentators to describe conditions as a “buyers’ market”.

Several factors underlie the current situation. New capacities in the US, Europe, the Middle East and Asia, especially for Group II and III base oil grades, are coming onstream, lengthening supply at a time when demand is not growing as rapidly as has previously been the case. Also, this year should see reduced loss of output as a result of planned maintenance, with many producers electing to carry this out during 2013.

The additional Group II and III supply will enter global markets having to fight for 
custom by replacing, or being blended with, Group I base oils in existing applications, as well as being used to produce higher quality lubricants mandated by tighter specifications and legislation. The net effect will be prices under pressure during the major part of the year. The situation will become clearer as the destocking/restocking effects of the Western year end and Asian Lunar New Year holidays work themselves through.

On the brighter side, demand into the automotive sector continues to strengthen in many markets, with mainland Europe being a notable exception. Not only is volume 
demand for lubricants increasing, but tighter specifications to meet stricter environmental performance targets are encouraging the use of more premium quality base oils.

Elsewhere, bio-based lubricants are making steady inroads into many market sectors on the back of enhanced performance and growing demand for greener products, especially where the lubricant is lost during use.

Markets and technology trends will be addressed at the ICIS World Base Oils & 
Lubricants Conference in London this week. I hope you find this publication and the event both useful and stimulating.

By: John Baker
+44 20 8652 3214

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