Japan’s August base oils output falls

Japan’s base oils and lube output fell in August to the lowest almost three years as the shutdown of a major base oils unit compounded the drop in the country’s production capacity.

A seasonal slowdown in demand partially cushioned the impact of the drop in output.

Supply still tightened sharply, triggering a drop in exports to a three-month low.

Japan’s base oils and lube output of 150,170 kilolitres (133,000 tonnes) in August fell from 187,300 kilolitres the previous month, government data showed.

Production fell for a seventeenth straight month from year-earlier levels to the lowest since late-2021.

The extended contraction reflected the impact of lower production capacity following the closure of two base oils units in Japan in the last two years.

A major base oils unit was then taken offline from early July after a fire, compounding the drop in output.

Supply remained sufficient to meet domestic demand, partly because of a seasonal dip in consumption in the month of August.

Supply could face more difficulty to cover domestic requirements in September, when consumption typically gets a seasonal boost.

The tighter supply had a more immediate impact on Japan’s base oils exports, which fell for a twelfth month in August from year-earlier levels.

Exports to southeast Asia continued to fall the most.

The drop in shipments forced buyers in that region to seek alternative Group I supplies or alternatives to Group I supplies.

The drop in exports to China was more muted so far this year, with shipments even rising in the month of August.

The planned closure of a Group I plant in China in October could support stronger demand for supplies from Japan over the coming months.

Japan’s tighter supply could complicate its ability to cover any such pick-up in requirements from the country.