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http://www.icis.com/resources/news/2015/02/13/9860835/base-oils-group-ii-plants-lengthen-supply/
BUYERS’ MARKET FOR 2015
Chevron's major project at Pascagoula has added heavily to Group II capacity in the US
For base oils, generally “it is very much a buyers’ market and is likely to become more so over the next year or two,” says Crichton. “A lot of significant capacity has come on stream over the past year, with new Group II and III capacity coming on to the market much faster than Group I is being taken out.”
With all the new capacity coming through, unless there is sufficient extra demand to absorb it, prices are likely to go one way: down. Base oil prices have dropped significantly over the past year, mainly in response to supply factors and the trend to follow falls in crude prices which have dropped by 60% in the past six months.
However, there has also been a fall in demand growth globally – with the most significant factor being the slowdown in China. We have all become used to double-digit GDP growth in China (now the world’s second-largest economy and already the biggest in terms of purchasing power parity, the measure of economic output favoured by many economists) and with growth of just 7.4% in 2014 and around 7% forecast for 2015, that erstwhile engine of global demand is no longer firing on all cylinders.
BUYERS’ MARKET FOR 2015
Chevron's major project at Pascagoula has added heavily to Group II capacity in the US
For base oils, generally “it is very much a buyers’ market and is likely to become more so over the next year or two,” says Crichton. “A lot of significant capacity has come on stream over the past year, with new Group II and III capacity coming on to the market much faster than Group I is being taken out.”
With all the new capacity coming through, unless there is sufficient extra demand to absorb it, prices are likely to go one way: down. Base oil prices have dropped significantly over the past year, mainly in response to supply factors and the trend to follow falls in crude prices which have dropped by 60% in the past six months.
However, there has also been a fall in demand growth globally – with the most significant factor being the slowdown in China. We have all become used to double-digit GDP growth in China (now the world’s second-largest economy and already the biggest in terms of purchasing power parity, the measure of economic output favoured by many economists) and with growth of just 7.4% in 2014 and around 7% forecast for 2015, that erstwhile engine of global demand is no longer firing on all cylinders.
