China’s February base oils output falls

China’s base oils output fell to a multi-year low in February, contrasting with signs of reviving economic activity in the country.

Low base oils output suggested domestic buyers were relying more on supplies from overseas sources to cover requirements.

Shipments from suppliers in Asia-Pacific showed signs of rising in February from the previous month.

But they remained relatively low, especially at a time of year when China’s base oils imports typically rise strongly.

They were also relatively low in view of buyers’ lack of stock-building before the lunar new year holidays and ahead of the upcoming spring oil-change season.

Low domestic base oils output in February and a muted rise in imports pointed to a disconnect between supply and demand.

The trend raised the prospect of a stronger pick-up in base oils requirements over the coming months, or a slowdown in manufacturing activity and a subsequent drop in lubricants consumption.

China’s output of Group I, Group II and Group III base oils fell to less 295,000t in February, according to OilChem China.

The volume fell from a five-month high of around 330,000t in January to levels that were even lower than output during second-half 2022.

Frequent lockdowns in China during that period slashed economic activity and lube consumption.

The February volume was down from almost 430,000t during the same month a year earlier and from more than 570,000t in February 2021.

Base oils output fell because of plant shutdowns and run-cuts that slashed China’s Group II production to a multi-year low.

More plant maintenance work is scheduled to take place in China over the coming months.

China’s domestic Group II base oils prices rebounded in early February as industrial activity revived following the lunar new year holidays.

Prices steadied since then.

They also remained much lower than their peak levels last November when tight domestic supply coincided with firmer demand.

The prices have held at levels that were unlikely to trigger a surge in regional base oils shipments to China.

The lack of any such surge in supplies, combined with low domestic output, suggested that domestic demand remained lower than usual.