By Judith Taylor
HOUSTON (ICIS)--The growing production capacity of re-refined base oils in the ?xml:namespace>
“We are getting to the point of survival of the fittest,” one re-refiner said.
FCC Environmental at
These capacities add to Avista Oil’s 1,250 bbl/day Group II re-refining at
Safety-Kleen’s 2013 acquisition of Evergreen added about 1,150 bbl/day of Group II base oil re-refining to Safety-Kleen’s strength in the
Safety-Kleen has 700 bbl/day of Group I base oil production at
The company also has 4,200 bbl/day of Group II re-refined production at
If by 2017 re-refining capacities expected to come on-stream do so, the North American base oil re-refining capacity could slightly exceed 1m tonnes, according to some industry analysts.
Sources pointed out that base oil market prices dropped considerably in late 2013, with refined oil prices also seeing downward price movements.
The fall in crude oil is illustrated in the following chart:
Front-Month Crude Oil Contract
Base oil prices are pressured down on supply/demand fundamentals tilted to the supply factor, with a rash of heavy discounting prevailing in late November and early January.
These dynamics hit the re-refined base oil market alongside the virgin base oil market.
At the same time, used oil collection costs have not gone down.
In the re-refined base oil market, used motor oils are collected via each company’s collection capability, including logistics and storage units.
As a result of the cost gap between the cost of collecting the used motor oil and the margin compression in base oils, the attractive margins that spurred investments in re-refining have faded or disappeared.
Industry experts said that re-refining companies that can buy large quantities of the highest quality used oil at attractive prices and operate associated re-refineries at optimal efficiency while producing superior quality base oils are best suited to weather the challenging base oil market conditions of 2014.
Capping these challenging conditions and underscoring the downward price pressure on base oils, Group II producer Motiva announced on 8 January that it is reducing posted prices on all grades effective 10 January.
Motiva is moving down light and medium viscosity Group II base stocks by 25 cents/gal and reducing the heavy viscosity base oils by 30 cents/gal.
Ahead of this price reduction, Motiva’s posted price for its light grade Group II base oils was at $3.62/gal, with mid vis at $4.00/gal and the heavy stock at $4.55/gal.
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