China’s base oils demand extended its sharp slide in August in the face of unusually weak lubricants consumption.Notional demand, or output plus net imports, fell to less than 395,000t in August, from an already low 440,000t the previous month, government and industry data showed..The drop in demand cut total consumption to 4.21mn t in the first eight months of the year. The volume was down 28pc from 5.83mn t during the same period last year.China’s lube demand had mostly risen steadily in recent years on the back of strong economic growth. Any dip in consumption had been small.This year’s slump in demand diverged from that long-term trend, reflecting the extent of the slowdown in the country’s economic activity.Lube demand in other countries rebounded following the end of pandemic-related lockdowns as economic and transport activity revived.China itself enjoyed such a scenario following the relaxation of lockdown measures in early 2020 when the Covid-19 pandemic began.A repeat of that pick-up in lube demand failed to materialize this year even after the relaxation of widespread lockdown measures in key commercial centres like Shanghai in the second quarter of the year.A revival in economic activity was more muted because of additional lockdowns in different parts of the country since then to prevent the spread of the virus. Power shortages in August compounded the slowdown.The slump in lube demand had multiple repercussions within and outside China.The country’s base oils plants have been operating at unusually low levels throughout the year and below 50pc of capacity since the second quarter.The low run rates partly reflected the surge in China’s base oils production capacity in recent years.Domestic demand was insufficient to consume even the lower volumes that domestic plants were producing. China’s base oils exports surged in response.Low domestic demand also slashed China’s base oils imports requirements.The result was unusually low domestic base oils prices in China and a persistent supply overhang in the Asia-Pacific market..China’s July base oils demand stays low
