Major challenges ahead in China’s base oils market

With the economic slowdown, many industries, for example the iron and steel industry remain sluggish and this has dragged down lubricant demand in the industrial sector. In addition, China’s car ownership has been expanding but the market is reaching saturation. Therefore, car sales growth has slowed down. In line with slower growth in the vehicle sector and decreasing demand from the industrial sector, China’s lubricant demand has weakened in 2015.

As a result of the low buying interest and squeezed production margins in the first half of 2015, PetroChina has been keeping extremely low operating rates at its Group I base oils units. Sinopec slightly increased the operating rates at its Group I and II base oils units. Base oils output from independent refiners also increased slightly. China National Offshore Oil Corporation (CNOOC) Huizhou reduced its output of non-standard base oils. Therefore, China’s base oils output is expected to decline in 2015.

In the import market, the third rise in excise tax and sluggish demand from the lubricant sector have resulted in a fall in base oil import margins, which will drag down import volumes in 2015.

What does this mean for international base oil suppliers in 2016?

  • China has cut tariffs on base oil imports from South Korea to 5.6% from 6.0% under the new China-Korea Free Trade Agreement signed on 1 June 2015. As the largest importer of Korean base oils exports, the lower import tariff will partially support the competitiveness of South Korea’s exports to China. Meanwhile, Taiwan (ECFA) and the 10 countries of the Association of Southeast Asian Nations (ASEAN) continue to enjoy zero tariff in China.
  • China is expected to remain the largest base oils import market in Asia by volume. In 2015, Group II base oil demand grew 5% year on year with 57% of demand met by imports; Group III base oil demand grew 4% year on year with 93% of demand met by imports. Although industrial lubricant demand is expected to decline in 2015, base oil demand for vehicle applications are expected to grow in 2016 which require Group II and III base oils, where international supplies have a competitive advantage.
  • There is also a shift in the import market structure, where base oil consumers have newly emerged into the top 10 importers’ list.

The China Base Oils Lube Markets Annual Report analyses the base oils and lubricants market and combines local insight with global perspective. It covers market supply and demand, provides analysis to support international players’ strategic planning work, and sheds light on key growth sub-sectors where international suppliers have a competitive edge.

The ICIS China Base Oils Annual Study covers:

  • In-depth analysis of China’s Group I/II/III base oils supply and demand balance
  • Forecasts on China’s base oils supply and demand in 2016-2020
  • China’s base oil imports and consumption by source and region in 2015
  • Ranking of China’s top 10 base oil importers in 2015 and analysis of import margins
  • Key issues in the overall Asian base oils market in 2015

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China Base Oils Annual Report

An in-depth review of China’s base oils markets in 2015 – with a detailed supply/demand outlook up to 2020, the newly updated annual study addresses all of the following questions:

  • Are there any changes in the distribution of demand for Group I/II/III base oils in the coming years?
  • PetroChina’s base oils output decreased significantly in the first half of 2015. Will this drag down China’s base oils production?
  • It is difficult to change an oversupplied market of Group II base oils in China. Will China increase its Group II base oil exports in 2015?
  • How have the import margins of Group I and II base oils been for Chinese importers in 2015?
Enquire about the China Base Oils Annual Study