· US moves to implement tariffs on supplies from overseas sources raise prospect of rise in uncertainty and costs, and change in trade flows for multiple products, including base oils.· Even without implementation of tariffs, possibility of such moves and counter-moves generates additional risk.· US remains reliant on base oils imports for most of its Group III base oils supplies.· US base oils imports hold steady in 2024 at more than 14.8 million barrels (2.1 million tonnes)..· Supplies from Canada account for around 12-13% of total US base oils imports in 2021-2024..· Relatively small share of supplies suggests that impact of any disruption to flows from Canada would be more muted and manageable.· But blenders’ lubricants formulations could complicate ease and speed of switching to alternative sources in place of those supplies.· Relative inelasticity of demand in short-term puts onus on buyers to absorb any higher cost.· Canada’s proximity to US boosts its attraction compared with Asia and Middle East, the US’ key sources of Group III base oils..· Shipments from Middle East account for more than 50% of total US base oils imports in 2024, up from 41% share the previous year.· Shipments from South Korea account for 30% of total imports in 2024, up from 26% share in 2023..· Longer shipment time between loading and delivery of supplies from those markets increases risk of implementation of tariffs while shipments are enroute to US.· Uncertainty about possibility and timing of any new tariffs boosts attraction of shipments with shorter delivery time and of cutting over-reliance on any single market..· Uncertainty boosts attraction of moving more cargoes from South Korea and Middle East to markets that are less likely to impose tariffs, such as Europe.· Europe’s Group III base oils prices weaken relative to US prices since end-Q3 2024..· Any moves to direct more shipments to Europe instead of US could exacerbate the price trend by adding to supply in Europe and cutting volumes bound for US..· Any reciprocal moves to impose tariffs on shipments from US would similarly impact costs and trade flows from US to those markets.· Mexico is destination for more than 20% of US base oils and lube exports in 2022, more than 35% in 2023, and more than 40% in 2024..· Europe is destination for more than 23% of US base oils exports in 2022-2024..· Prospect of additional tariffs on US base oils imports and exports was previously small.· Prospect of additional tariffs is now higher than before.· Even without implementation of tariffs, prospect of such a scenario generates uncertainty, complicates planning and increases costs..Global base oils margins outlook: Week of 10 Feb.Asia base oils demand outlook: Week of 10 Feb.Asia base oils supply outlook: Week of 10 Feb
