China’s June Base Oils, Lubricants Exports Extend Surge

China's base oils and lubricants exports extended their sharp sharp rise in June as abundant domestic output allowed producers to expand into overseas markets struggling with tight supply and high prices.

Combined base oils and lubricants exports rose to 74,400 tonnes in June from 70,700 tonnes in May, General Administration of Customs data showed.

The surge lifted second-quarter exports to a record-high of more than 200,000 tonnes, up from less than 130,000 tonnes in the first quarter and year-earlier levels of less than 120,000 tonnes.

The rise began accelerating in April as supply disruptions elsewhere widened export opportunities. Strong domestic production and relatively stable feedstock costs allowed Chinese refiners and lubricant blenders to supply markets where competitors faced tighter supply and higher costs.

Exports also became more geographically diverse. Southeast Asia remained the largest destination for China’s base oils exports, but its share continued declining as shipments increasingly reached more distant markets including Latin America.

Higher exports and diversification of the shipments left China turning a temporary opportunity into a more permanent share of markets that it barely served a year ago.

Key Highlights

·         Base oils exports remained close to their highest level in almost four years despite edging down from May's peak.

·         Base oils exports to Latin America climbed to more than 3,600 tonnes in June, up from typical monthly volumes of around 200 tonnes over the previous three years.

·         Lubricants exports continued accelerating alongside base oils, with Japan emerging as a rapidly growing destination.

Market Repercussions

Competitive prices and steady domestic supply left China a major beneficiary of the disruptions impacting other markets since the end of February.

Its growing market position contrasted with refiners and blenders in other regions that faced higher feedstock costs, less stable supply and shrinking spot availability for export.

India’s base oils exports also surged in the second quarter, pointing to a broader pattern of Asian producers turning the disruption into lasting market share.

China’s stronger export demand also increased the incentive for refiners to sustain higher operating rates despite softer domestic demand. Base oils and lubricants exports account for the equivalent of around 14% of China's base oils output in May and June, up from less than 10% last year.