Chinese base oils demand may well have the chance to pick up in 2013 in line with recovering demand from industrial lubricants and slightly increasing demand from automotive lubricants according to a February 15, 2013 ICIS.com news report. Many industry experts predict global lubricants will see 2.6% per year demand growth, with motor vehicles the biggest downstream end-users of lubricants. China is currently playing a leading role in raising the demand for automobiles and hence lubricants. According to the article, for every 1 million cars sold, automotive lubricant demand increases by about 91,000 tonnes.

On the supply side, the ICIS article continues by stating that Group I base oils in the first quarter of 2013 are slightly tight in response to the shutdown and scheduled maintenance of base oil plants. Sinopec Jingmen has a scheduled maintenance of its 200,000 tonne/year Group I base oil plant at Jingmen Province from late December 2012 to March 2013. Shandong Qisheng shut down its 70,000 tonne/year Group I base oil unit from late December over poor margins. The restart date still has not been set. PetroChina subsidiary Dalian Petrochemical shut down one line of its 450,000 tonne/year Group I base oil plant from late December because of oversupply in Northeast China. The restart date has not yet been decided. At the same time, demand from lube oil producers is picking up. As a result, prices of Group I base oil are expected to be stable to firm over this period, says ICIS.

For Group II base oil supply, although many Asian refiners will have maintenance in 2013, supplies from Chinese domestic producers will increase in the second half of the year. Therefore, prices of Group II base oils in the domestic market will fluctuate in 2013. The ICIS article goes on to say that, among Asian refiners, GS-Caltex will undertake maintenance of its 1.3 million tonne/year Group II/III base oil plant from March to April. S-Oil will have maintenance of its 1.02 million tonne/year Group II base oil plant in the third quarter. And Taiwan's Formosa Petrochemical will have maintenance of its 600,000 tonne/year Group II base oil plant in the third quarter in 2013. Meanwhile, Sinopec Jinan will undertake maintenance of its 150,000 tonne/year Group II base oil plant at Jinan Province from March. Hainan Handi Sunshine Petrochemical will have maintenance of its 300,000 tonne/year Group II base oil plant in the third quarter in line with the whole refinery maintenance in 2013. PetroChina subsidiary Daqing Petrochemical will have maintenance of its 200,000 tonne/year Group II base oil plant in the third quarter.

Looking at new start-ups, Sinopec Yanshan plans to put its new 300,000 tonne/year Group II base oil unit on stream in Beijing in the second half of 2013. And, according to Sinopec, its subsidiary Maoming Petrochemical's 200,000 tonne/year Group II base oil plant in Guangdong province will be put into production, in 2014. China National Offshore Oil Corp (CNOOC) began construction of a 600,000 tonne/year Group II base oils plant at Taizhou in east China's Jiangsu province, in June 2012. The new facility is expected to come on stream in 2015.

With a series of expansion of new facilities of Group II base oil plants in the domestic market, supplies will accelerate rapidly. As a result, import quantities of Group II base oils will drop in the near future, says ICIS.

Although new Group III base oils facilities are expected to be scarce in 2013-2017 as a result of technological limits, the supplies over the world have increased greatly in the last five years. However, the demands of Group III base oils will still be limited in 2013.

The ICIS article continues by stating that demand and prices of many base oils, according to major traders, will pick up after the Chinese New Year holidays due to the peak season for lube oil change from February to May. Therefore, they purchased some cargoes in January and are now waiting to increase offers after Lunar New Year.

The ICIS article sums this up by stating that base oil demands in the Chinese domestic market will grow slightly due to the gradual recovery of industrial and automotive sectors in 2013. Supplies of Group I base oils in the first quarter of the year were tight, which is supporting prices as stable to firm in this period. However, with the uncertainty over the international economic recovery, prices for base oils from the second to fourth quarter of the year have a lower probability of staying firm.

To read the complete ICIS.com article, click here