Year-end demand slowdown leaves blenders with lower inventories, paving way for need to replenish stocks eary this yearStronger domestic prices point to signs of pick-up in demand for replenishment suppliesGroup II imports' share of total demand falls to more-than five-year low as domestic supply covers more requirements.China’s base oils demand fell in December for the second time in three months, with muted consumption deterring buyers from replenishing stocks.The slowdown raised the prospect of a stronger rebound early this year as buyers prepare for the spring oil-change season after the Lunar New Year holidays.Total demand, or output and net imports combined, fell to 570,000 tonnes in December, General Administration of Customs and OilChem China data showed..The volume fell by 1% year on year and dipped from an eight-month high of more than 600,000 tonnes in November.The slowdown capped a subdued year overall.China’s total demand of just over 6.7 million tonnes in 2025 was down 0.6% from almost 6.8 million tonnes the previous year. The muted consumption added to the incentive for blenders to manage inventories carefully..Key Highlights· Fourth-quarter demand held steady at 1.70 million tonnes, edging up by 0.2% year on year and almost the same as the third quarter.· First-quarter demand has risen from the fourth quarter in each of the past four years, raising the prospect of a pick-up in requirements early this year.· Imports in December accounted for the smallest share of demand in more than two years, increasing pressure on overseas refiners to seek alternative outlets..China December Base Oil Imports Fall To 17-Month Low, Exports Rise.· Group II imports’ share of total Group II demand fell in December to the lowest level in more than five years, underlining the shift towards domestic supply.· Group III imports’ share of total Group III demand steadied in the fourth quarter, holding well above levels in 2024 but down from levels above 60% before 2024..China’s December Base Oils Output Hits 14-Month High on Group II.· The steadier Group III import share coincided with more attractive economics for imported base oils versus domestic production to cover requirements..Market RepercussionsCautious buying at the end of last year left blenders with leaner inventories, increasing the need for more replenishment supplies ahead of the seasonal rise in lube consumption after the Lunar New Year in the second half of February.The recent strength of domestic China base oils prices pointed to a subsequent pick-up in demand for such supplies..Asia/China Base Oil Margins: Market Signals and Trade Implications.The outperformance of domestic prices relative to wider Asia prices suggested that domestic refineries rather than overseas suppliers were the primary beneficiaries of the rise in demand.The dynamic raised the prospect of capping import volumes as a share of total supply, forcing Asia refiners to divert more shipments to alternative markets.Such a move would come at a time of rising regional production capacity, further intensifying competition for export outlets.
