China low-viscosity Group I base oils to extend gains into Q2

25 March 2014 06:41 Source:ICIS News

Focus story by Whitney Shi

China low-viscosity Group I base oils to extend gains into Q2SINGAPORE (ICIS)--Spot low-viscosity Group I base oils prices in China look set to continue rising into the second quarter, backed by a seasonal pick-up in demand amid tightening supply, market sources said on Tuesday.

Group I SN150 base oils were assessed at yuan (CNY) 9,375/tonne ($1,512/tonne) on 21 March, up by CNY300/tonne or 3.3% from the start of the year, according to C1 Energy, an ICIS service in China. The price was CNY100/tonne higher than that of Group II N150 grade.

Import availability of Group I base oils is scarce given a heavy turnaround schedule at regional facilities in the first half of the year. (Please see the table below)

In the domestic market, supply is also tightening given low operating rates at China’s largest oil refineries Sinopec refineries.

Sinopec, China’s largest oil refiner, produced around 180,000 tonnes of Group I base oils in the first quarter of 2014, down by 25% from the previous corresponding period, according to data compiled by C1 Energy, an ICIS service in China.

The company has six operational Group I base oils units with an aggregate production capacity of 1.42m tonnes/year.

No maintenance is scheduled at Sinopec’s refineries in the first half of the year, but the company’s base oils plants have been running their plants at 60-65% of capacity because of limited supply of feedstock vaccum gas oil (VGO) as crude oils supplies are tight, a company source said.

VGO is a derivative of crude oil.

Sinopec’s supply of Group I base oils with higher quality have slumped, prompting it to allocate the bulk of its output this year for captive use of its lubricant plants, thus limiting the supply to the Chinese domestic market, the company source said.

China’s other energy major PetroChina, which has four operational Group I base oils plants with a combined production capacity of 1.8m tonnes/year, has scheduled turnarounds at some of its facilities.

A 260,000 tonne/year Group I base oils plant operated by its subsidiary Fushun Petrochemical in Liaoning province was taken off line in late January for maintenance and is expected to be restarted late this month, a company source said.

Fushun Petrochemical has not been offering material to the domestic market during the shutdown of its plant.

Dalian Petrochemical – another subsidiary of PetroChina – is scheduled to conduct a two-month turnaround at its 450,000 tonne/year Group I base oils facility in Liaoning province from April, a company source said.

As the company will have to prioritise supply to contract customers, it raised prices for commercial spot supply of Group I base oils by a total of CNY300-400/tonne from late February, the source said.

Group I output from Daqing Petrochemical and Lanzhou Petrochemical, meanwhile, is being consumed by PetroChina’s subsidiary lubricant plants.

On the demand front, the cold weather at the start of the year has been boosting consumption by downstream lubricants sector for low-viscosity Group I base oils, industry sources said.

Some lubricant producers are considering buying Group II grades as replacement for the more expensive Group I base oils. Others, however, are not too keen to make the switch as Group II base oils are less soluble.

Maintenance schedule of Asian Group I base oils plants in H1 2014 Unit: '000 tonnes
Country/Region Refiner Plant location Unit capacity Time of shutdown Time of restart
Taiwan CPC-Shell Lubricants Kaohsiung 250 Early June 2013 N/A
China Fushun Petrochemical Fushun, Liaoning 260 Late January March
Russia Lukoil Perm 480 Early March Early May
Russia Lukoil Nizhny Novgorod 345 Early March Early April
Thailand Integrated Refinery & Petrochemicals Complex (IRPC) Rayong 350 Mid March Mid April
Russia Gazprom Neft Omsk 600 Late March Late April
China Dalian Petrochemical Dalian, Liaoning 450 April June
Russia Rosneft Angarsk 250 May June
Japan JX Nippon Oil & Energy Mizushima 250 Late May September
Japan JX Nippon Oil & Energy Mizushima 170 May June
Source: ICIS C1 Energy

($1 = CNY6.20)

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

By Whitney Shi