<article><p class="lead">China's base oil imports stayed unusually low in September, leaving a growing number of distributors and blenders in the country with increasingly tight supplies.</p><p>Base oil imports rose in September to a three-month high of 146,030t. But they were still the third lowest in the past two years. The lowest and second lowest had been in July and August.</p><p>The low volume slashed total imports to 402,400t in the three months to the end of September. The volume was down by 35pc from 612,430t in the second quarter and the lowest quarterly volume in a decade.</p><p>Imports had fallen in July-August as buyers held back in response to a seasonal slowdown in demand. Falling overseas prices added to buyers' preference to hold back until they were comfortable that prices had bottomed out.</p><p>Healthy availability of supplies in China's domestic market and competitive prices for these volumes curbed further any urgency to seek overseas supplies.</p><p>That dynamic began to change in September, when buyers typically seek to replenish depleted stocks ahead of a seasonal pick-up in demand at the end of the third quarter. </p><p>Those plans faced disruption after the shutdown of Taiwan's Group II base oil unit was extended for another month to the end of September. The unit had already been off line since the beginning of July for scheduled maintenance.</p><p>The unexpected extension of the shutdown prevented Chinese buyers from replenishing their depleted stocks of supplies of Taiwan origin. Many of them needed these supplies to meet lubricant formulation requirements.</p><p>Chinese base oil imports from Taiwan fell to less than 100t in September, down from average volumes of more than 25,000 t/month in the first half of the year.</p><p>Availability of domestic supplies also tightened in September because of extended plant shutdowns and run cuts. A sustained rise in China's diesel prices from the beginning of that month also increased the attraction for domestic refiners to produce more of the motor fuel instead of base oils. </p><p>The combination of low base oil imports, tighter domestic availability and rising diesel prices left a growing number of blenders seeking to replenish depleted stocks in the face of a sharp rise in domestic prices.</p><p class="bylines">By Iain Pocock</p></article>
