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May 9, 2017

Volume 7 Issue 4

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China still a Net Importer of Base Oils

SHANGHAI – China imported 10.5 percent more base stocks in 2016, totaling 2.8 million metric tons. Exports increased by 54 percent, to 46,920 tons, in the first year since rules on exporting base oils were relaxed. 

The statistics were shared by Ding Yongge, president of trader Jiangsu Xin Jiyang Group, in an April 25 presentation at Enmore’s 10th China Lubricants Market Focus 2017 here. 

Ding emphasized that while China is still by far a net importer of base oils, the increasing volume of exports might suggest that the quality of domestic production is improving. “With new base oil facilities put into use this year, we are having more good quality products for exports.” 

Most exports were made through Petro China, Sinopec and Hainan Handi Sunshine. Petro China’s main exported product, naphthenic base oils, were produced primarily at its Karamay Petrochemical refinery, and were mainly shipped to Taiwan. Hainan Handi Sunshine Petrochemical Co. exported its API Group II base oils mostly to countries in Southeast Asia and South Asia. 

China scrapped a rule in January 2016 mandating that base oils, lubricants and greases could only be exported through one of the three state-owned oil companies. While exports increased from a small base volume in 2015, the full effect of the rule’s relaxation may be lagging, and Ding noted that exporters are also still at a pricing disadvantage because there are currently no tax rebates for base oils.

“Under the current policy, only base oil exports that were processed using imported raw materials can enjoy the tax rebate,” Ding told Lube Report Asia. A source at Hainan Handi told Lube Report Asia last June that her company was one of the only Chinese base oil exporters because it was one of the only refiners approved for tax rebates. 

On the other hand, China relies on imports for 40 percent of its base oils and more than 80 percent of its high-viscosity grades, such as Group II 500 neutral and 600N. “Currently there are few base oil manufactures that can produce high-viscosity base oils and they mostly supply to contract clients,” Ding explained. 

South Korea, Singapore and Taiwan continued to be China’s top three sources of base stock imports in 2016, according to Ding. South Korea accounted for nearly 35 percent of imports; Singapore 26 percent; and Taiwan supplied 14 percent. 

Imports from South Korea increased by 13 percent from 2015 due to a trade agreement between China and Korea, Ding noted. “Currently the tariff is reduced to 4.8 percent and is still going down by 0.4 percent each year.” 

Eastern China, northern China and southern China consumed the most imported base oils in 2016. East China demanded 1.4 million tons, or 50 percent of base oil imported during the year, due to the significant number of lubricant manufacturers and base oil importers located in the region. 

With Tianjin becoming the second largest port for base oil imports, North China imported 28.4 percent, or 800,000 tons of base oils. The Tianjin Lingang Economic Zone houses many large blenders that use materials from Singapore, Taiwan, South Korea and Japan. 

South China consumed 470,000 tons, or around 17 percent, of the 2016 imports. The demand came largely from Shell’s Zhuhai blending operations and from Yuchai Petronas Lubricant Co. 

Ding’s Jiangsu Xin Jiyang imports various products from South Korea, Japan, Taiwan, Thailand, Indonesia and the United States.