China’s April Base Oils Imports Fall, Lubricants Exports Jump

• Base oils imports fell to a four-month low amid regional maintenance and feedstock disruptions

• Base oils exports rose to a four-month high, while lubricants shipments climbed to a multi-year high 

• Lower imports alongside higher exports pointed to sufficient domestic availability to tap overseas supply disruptions and firmer regional prices

China’s base oils imports fell to a four-month low in April, contrasting with higher exports and a surge in lubricants shipments as suppliers tapped tighter overseas markets and elevated regional prices.

Imports fell to 132,000 tonnes, the lowest since December and the first year-on-year decline in four months, General Administration of Customs data showed.

Imports slowed amid regional plant maintenance work and feedstock disruptions that tightened base oils supply and lifted prices. Rising exports pointed to sufficient domestic availability despite the drop in cargo arrivals.

Key Highlights

·         Imports from South Korea fell to a four-month low, and from Taiwan to a 22-month low, amid plant maintenance work and run-cuts.

·         Imports from the Middle East held firm, pointing to Group III shipments that had already set off before the pause in flows from that region from end-February.

·         Base oils exports rose to 19,100 tonnes, climbing 19% year on year to a four-month high, with most of the supplies moving to Southeast Asia.

·         Lubricants exports rose to more than 37,000 tonnes, up 45% and for a sixth straight month to a multi-year high, with supplies moving to a wide range of markets including Southeast Asia, Central America, West Africa and Russia.

Market Repercussions

China’s domestic Group II base oils prices slumped relative to Asia prices in March and April, pointing to sufficient domestic availability even with the drop in cargo arrivals from two major regional sources of the supplies.

Healthy domestic Group II availability and lower prices instead incentivized other regional refiners to redirect more shipments to other outlets, easing tightness in those markets.

China's lower imports and higher exports further eased that tightness, while also enabling the country to expand its base oils and lubricants market share across other regions.

The muted impact of the slowdown in Group II imports contrasted with a surge in China’s Group III prices since early March, with the ongoing pause in shipments from the Middle East raising the prospect of a slump in May-arrival cargoes.

The price surge pointed to China's domestic Group III output being insufficient to cover the loss of Middle East import flows.