S Korea December base oils exports fall

South Korea’s base oils exports slid to unusually low levels in December, slashing the availability of surplus supply in the Asia-Pacific market at the end of last year.

The country’s total base oils exports of 290,100 tonnes in December dipped from more than 380,000 tonnes in October and in November, government data showed.

Shipments also fell for the third time in four months from year-earlier levels.

The December volume was the lowest since September, when a major Group II base oils unit in the country was taken offline for maintenance work that extended to end-October.

The drop in base oils exports in September facilitated moves to build stocks to cover requirements during the shutdown.

The slump in exports in December similarly preceded the planned shutdown of another major Group II base oils unit in the first quarter of this year.

It also followed unexpected production issues that affected another base oils plant in December.

The slide in South Korea’s base oils exports at the end of last year coincided with and cushioned against the impact of a seasonal slowdown in lube demand in the Asia-Pacific region.

It also curbed the opportunity for buyers to build stocks early ahead of an expected tightening of the region’s supply-demand fundamentals later in the first quarter of this year.

Asia’s Group II base oils prices held unusually firm late last year and early this year, pointing to signs of tighter-than-expected supply fundamentals.

The premium of Asia Group II heavy-grade prices over Singapore gasoil prices stayed unusually high early this year and during the fourth quarter of last year, at a time when it typically faces more downward pressure.

Asia Group II heavy-grade prices also flipped from a discount of more than $140/tonne to US export prices in the third quarter of last year to a premium of more than $50/tonne at the start of this year.

The firm price levels complicated the arbitrage to markets like Latin America and instead facilitated the opportunity for surplus US supplies to move to outlets like India.