Taiwan’s July base oils exports fall more

Taiwan’s base oils exports fell in July to a 10-month low, highlighting the impact of a sustained slump in demand from China.

Base oils exports of 21,070t in July fell from 23,100t the previous month to the lowest since last September, government data showed.

Exports had averaged more typical levels of around 41,000 t/month in the first quarter of the year.

Exports were even lower last September because of the protracted shutdown of Taiwan’s sole base oils unit throughout most of the third quarter of the year for maintenance work.

There was no such plant shutdown during the third quarter of this year.

The drop in shipments mostly reflected the fall in demand from China. The country is typically the largest outlet for base oils supplies from Taiwan.

China was the destination for more than 55pc of Taiwan’s base oils exports in 2021 and more than 65pc of the total in 2020.

The share has fallen to less than 45pc this year and less than 25pc in the three months to July.

China’s base oils requirements fell in the second quarter of the year because of lockdowns in key commercial centres like Shanghai.

The relaxation of the lockdowns since early June raised expectations of a revival in base oils and lube demand.

Taiwan’s base oils exports of 5,020t to China in July rose from 2,870t the previous month.

The volume was still unusually low. Exports to China had averaged more than 27,000 t/month in the first quarter of the year.

The lack of a significant recovery in shipments partly reflected domestic Chinese base oils prices that remained at a steep discount to Asia-Pacific prices.

The closed arbitrage incentivized even term buyers in China to redirect shipments from Taiwan to other markets instead.

The closed arbitrage also suggested either sufficient domestic base oils supply in China or a weak recovery in demand after the relaxation of lockdown measures.