Asia Group I BS150 base oils spot supply to tighten in Q2

Focus article by Whitney Shi

SINGAPORE (ICIS)–Spot supply of Group I BS150 base oils in Asia is expected to tighten in the second quarter because of heavy maintenance schedule at major regional facilities, market sources said on Monday.

Asian refiners may push up  BS150  offers through to June amid the shortage and higher production cost caused by rebounding crude oil prices, they said.

On 8 May, BS150  was assessed at $1,060-1,085/tonne FOB (free on board) Asia, up by $5/tonne at the high end of the range from the previous week, according to ICIS data.

Importers in China, however, may not accept higher prices because of weak domestic market given deteriorating economic conditions.

The country’s GDP growth slowed to a six-year low of 7% in the first quarter. Demand for downstream lubricants in the domestic industrial sectors has stayed soft.

Supply of BS150 will tighten with major Group I base oil facilities in Japan – a major exporter of the material – scheduled to undergo turnaround, market sources said.

JX Nippon Oil & Energy’s 250,000 tonne/year Group I base oils unit at its Mizushima B plant was taken off line in April for five months of maintenance.

The company’s 170,000 tonne/year unit in Hokkaido is scheduled to be shut in mid-May for one and a half months of turnaround, market sources said.

As the company needs to guarantee contract supply to its domestic customers, it will not be exporting Group I BS150 base oils, they said.

JX Nippon Oil could not be reached for comment on the turnarounds.

Meanwhile, Cosmo Oil plans to shut its 200,000 tonne year Group I base oils unit at Yokkaichi in Mie prefecture for a month-long turnaround from early June, a company source said.

In Thailand, supply of Group I BS150 base oils is also expected to be tight as technical problems prevent Thai Oil’s 300,000 tonne/year unit in Sriracha from running at full capacity, market sources said.

Taiwan, on the other hand, is depending on the import market for supply of BS150 following the permanent closure of CPC-Shell’s Group I base oils unit in Kaohsiung in late September 2014, market sources said.

In China, PetroChina Karamay Petrochemical has suspended commercial supply of BS150 since April to guarantee supply to its downstream company – Kunlun Lubricants – during the peak consumption season, a company source said.

Demand for BS150 typically peaks in May through the summer months.

PetroChina plans to shut its 700,000 tonne/year Group I base oil unit in Xinjiang for two months of turnaround from 20 May, the source said.

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