South Korea's base oil exports fell in June on the back of a slide in shipments to China, India and the US.
Exports of 345,000t in June fell from 403,380t the previous month, according to trade promotion organisation Kita.The volume was 17pc lower than the same month a year earlier and the second-lowest level in the past year. The lowest volume during this time was in March when a plant was off line for maintenance.
Even with the drop in shipments, total exports of 2.35mn t in the first half of the year were up slightly versus year earlier levels of 2.33mnt.
The drop in base oil exports in June coincided with a seasonal slowdown in regional demand. The start-up of a new Group III base oils plant in China in late May exacerbated the slowdown. A sharp fall in crude and gasoil prices that began in second-half May added to a reluctance to buy. The price volatility prompted many buyers to hold back until they were comfortable that base oil prices had bottomed out.
The drop in demand prompted South Korean producers to target other markets like the Mideast Gulf and Israel with more supplies.
South Korean base oil exports to China fell in June to a 20-month low of 57,100t, down from 88,010t the previous month. Total exports of 499,170t to the country in the first half of the year fell by 11pc from 559,820t during the same period last year.
The slowdown in exports reflected weak Chinese demand as buyers secured more supplies at more competitive prices from a growing number of domestic producers. A seasonal drop in demand added to the slowdown.
South Korean base oil exports to India fell in June to a nine-month low of 73,830t. Some buyers held back amid uncertainty about price levels following the sharp slide in crude prices in May and first-half June. The start of the monsoon season added to buyers' lack of urgency to commit to supplies.
Even with the slowdown in June, base oil exports of 522,910t to India during January-June were still up by 28pc from 407,510t during the same period last year.
The slower demand extended to the southeast Asian market. Base oil exports to this region edged back up to 72,100t in June from a five-month low of 66,170t the previous month. But total exports of 449,020t to the region in the first half of the year were down by 7pc from 481,170t during the same time last year.
The pick-up in supplies in June mostly reflected higher base oil exports to Indonesia and Thailand, as well as an increasingly steady flow of supplies to the Philippines.
Base oil exports to Thailand rose to 24,500t in June, up from 17,920t the previous month. But the shipments faced growing competition from a pick-up in supplies from the country's domestic producers. Their domestic sales rose in May for the first time in seven months, at a time when overseas demand for Group I base oils was also weak.
Slower demand in South Korea's key regional markets prompted producers to eye other more distant markets like Mideast Gulf to clear some of their surplus volumes.
Base oil shipments to the UAE rose in June to an eight-month high of 12,290t. The last time that exports to this market exceeded the 10,000 t/month level was last October. Demand rose after Group II price offers in this market fell, narrowing their premium to Group I prices. A closed arbitrage from Europe added to the attraction of securing high-quality supplies from another source.
The pick-up in shipments to UAE coincided with a rise in base oil exports to Saudi Arabia to 10,110t. The volume exceeded the 10,000 t/month level for just the second time in the past decade.
Base oil exports to the US slowed in June to a three-month low of 44,130t. But shipments of 338,960t to this market were less than 10,000t lower than during the same period last year. The US Group III market has seen a steady rise in imports from the Mideast Gulf market. Its Group III prices are also higher than any other major market, boosting its attraction for overseas suppliers.
Base oil exports to the Netherlands and Belgium combined rose in June to a five-month high of 15,680t. But total exports of 77,760t to these markets in the first half of the year were 34pc lower than the same period last year. The slowdown reflected the impact of plant maintenance in South Korea earlier in the year, combined with intense competition from plentiful supplies in the European market.