China Group II base oils firm in absence of FPCC supply

SINGAPORE (ICIS)–China’s Group II high viscosity base oils prices are expected to remain firm amid short availability of spot cargoes due to a prolonged shutdown of Formosa Petrochemical Corp’s (FPCC) plant in Taiwan.

Prices of the material were holding steady in the Chinese domestic market this week after rising since the start of August.

On 17 August, prices of Group II 500N base oils were assessed at yuan (CNY) 8,800/tonne, up by CNY175/tonne or 2% week on week, according to ICIS data.

Prices had risen since the start of the month despite the traditional lull demand season. High temperatures slow down activities at downstream factories and in the construction industry.

Restocking activities picked up following an unexpected delay in the restart of FPCC’s 600,000 tonne/year base oils plant, helping the prices recover from a general downtrend in June and July.

The plant was taken off line on 9 July for a 55-day turnaround. But the shutdown was extended by a month and the plant is now expected to resume production in October.

Considering its low product inventories, FPCC decided to suspend its base oils supply to China and other regions in Asia in September.

FPCC is a major supplier of base oils to China. It accounted for 14.2% of China’s total base oils imports in 2017.

It offers around 40,000 tonnes of base oils to China on a monthly basis, including 20,000-25,000 tonnes of spot cargoes, of which, 10,000-13,000 tonnes are Group II 500N.

Reduced supply could push up China’s domestic Group II base oils prices further in the near term as demand typically peaks in September and October.

Focus article by Jenny Cao

Picture: Base oil is used in motor oil. (Source: REX/Shutterstock)