China’s May Group III Supply Steady As Imports Hit 22-Month Low

• China's Group III imports fell to a near two-year low in May as Middle East shipments slumped during the disruption period

• Total Group III supply held near typical levels as domestic Group III output rose to a 14-month high, offsetting the fall in imports

• China's ability to replace imported supply contrasted with tightening conditions in the US and Europe, where alternative Group III sources remain limited

China's Group III base oils supply held firm in May despite a sharp drop in imports, pointing to an ability to replace lost Middle East volumes that other markets lacked.

Total Group III supply held above 52,000 tonnes, up from less than 50,000 tonnes in April and close to the 2025 monthly average of around 51,000 tonnes, General Administration of Customs and OilChem China data showed.

Supply held firm even as a slump in the country’s Group III imports cut their share to just 26% of total supply, down from more than 45% in 2025.

China's stable supply set it apart from other major Group III markets. Europe and US supply fell in April as Middle East imports collapsed, with no alternative source in a position to fill the gap.

The divergence pointed to China as the only major market with enough spare Group III capacity to offset much of the lost Middle East supply.

Key Highlights

·         Group III imports fell to their lowest since July 2024, with Middle East shipments dipping to the lowest since October 2023.

·         Middle East imports accounted for more than 65% of total inflows but only 17% of total Group III supply, down from more than 40% in 2025.  

·         Domestic and overseas Group III prices surged as supply tightened, curbing the import option for buyers and giving domestic refiners more reason to raise output.

Market Repercussions

China was able to replace lost imported Group III volumes with higher domestic production, reducing its exposure to the market disruption.

The response reinforced a growing divide between China and other major markets, where the loss of Middle East supply resulted in tighter availability and pressure on high-end lubricants production.

Higher domestic output could further reduce China's dependence on imported Group III base oils if overseas prices remain elevated and supply tight.

China's reduced reliance on imported Group III meant more of those volumes remained available to markets where domestic alternatives do not exist, leaving the shortage less severe than the scale of the disruption implied.