Latin America's Jan lube demand rises

Latin America’s lube demand climbed in January for a fifth month as a recovery in consumption in markets like Argentina added to sustained growth in Brazil.

The region’s lube consumption of more than 195,000 tonnes in January rose from around 185,000 tonnes the previous month, government and industry data showed.

Brazil’s rising consumption provided the key support to Latin America’s growing lube demand over most of the past year.

Demand got additional support in January from a rise in consumption in Argentina for the second time in three months.

Latin America’s rising lube consumption far outpaced the relatively steady base oils output in Brazil and Argentina.

The dynamic increased further the region’s reliance on base oils supplies from overseas markets to cover a growing shortfall.

The US is the key source of overseas base oils supplies for the Latin American market.

But a fall in US exports to the region extended into January for the twelfth time in thirteen months.

Firm demand and falling shipments from the US left the region with increasingly tight supply at the start of the year.

Latin America’s base oils output and US exports to the region combined came to around 173,000 tonnes in January.

The volume fell by mor than 15% from year-earlier levels and lagged total demand for a third straight month.

The tighter supply-demand fundamentals contrasted with the prospect a seasonal pick-up in regional consumption from the end of the first quarter.

The dynamic speeded up the need for blenders to line up additional supplies early in the year to replenish depleted stocks.

The round of stock replenishment increased the importance of regional base oils output holding firm.

It also increased the need for a rise in shipments from overseas markets.

Blenders also faced the challenge of balancing stock-replenishment plans with uncertainty about the imposition and impact of any tariffs on economic activity and lube demand in the region.

The uncertainty incentivized buyers to maintain lower base oils stocks and to expand their overseas sources of supplies.

The long shipment time between procurement and delivery of any such overseas supplies, and tighter availability in Europe and Asia early this year, added to the complication of buyers’ inventory management plans.