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Updated to Q1 2020
Supply levels are likely to remain at healthy levels at the beginning of January, but could tighten further in the quarter amid some production issues. There is some talk of possible maintenance during the first quarter which could impact stocks. The recent fire at Total’s Gonfreville plant in France has meant that the plant has severely limited stocks of base oils, with some customers unable to secure material for at least January.
Buying interest for Group I base oils in Europe is set to increase during January as players restock after the new year. Domestic demand is likely to stabilise towards the end of January and remain at steady levels for the rest of the first quarter. Export demand is likely to be strong through the first quarter and further into the year, with African markets expected to have particularly strong buying interest in 2020.
Group II base oils supply is expected to be healthy in the first quarter. The removal of a tariff waver on Group II imports to the EU is in force from the beginning of January. There will be a quota of 200,000 tonnes every six months and duties will be applicable on any material over this amount. Most players expect that material imported in the first quarter will not be impacted by duties.
Demand will be fairly strong at the beginning of the first quarter as players restock following the holiday period in Europe. While there could be some switches from Group I to Group II, the majority of players switched in 2018–19 and as such no major change to demand is anticipated. Buying interest is expected to be generally stable during the quarter, though demand could rise if import levels are impacted by the new tariffs.
The length that has been seen in the Group III market at the end of the fourth quarter is set to continue into January. Healthy production coupled with less demand from lubricants producers amid continued issues with the Lubrizol Rouen plant at the end of 2019 could see an oversupply in the market during the first quarter, particularly on 4cSt material. Availability of 6cSt and 8cSt material is set to remain balanced during the quarter.
Demand should see a lift in January as players restock following plant shutdowns over the holiday period. There are some expectations of higher demand from the automotive industry in 2020, with players anticipating more switches from Group I material to Group III. Automotive industry demand looks likely to recover slightly in 2020, which could lead to a further increase in buying interest for Group III material.
We offer the following regional Base oils-Lubes analysis and news coverage to keep you informed of factors and developments affecting prices in the Base oils-Lubes marketplace.
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