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Taiwan’s Formosa competes for base oil sales

  • Market: Oil products
  • 13/11/09

Singapore, 13 November (Argus) — Taiwanese refiner Formosa Petrochemical has sold its first spot shipment from its new API Group 2 base oil plant at Mailiao.

The deal for 5,000t of Neutral 500 (N500) base oil is thought to have been done at around $810/t fob, destined for the Chinese market. Based on current freight of $25-29/t, the cargo will land in China at $830-840/t cfr, levels lower than recent Group 2 business seen at $830-850/t cfr.

Formosa's next shipment, also heading for China, is a 3,000-4,000t cargo of N150 priced at around $745/t fob, or at a delivered price indicated at $760-770/t cfr. Buyers in China recently paid $770-800/t cfr for South Korean base oil, so South Korean producers are likely to come under pressure if Formosa continues to offer aggressively to gain market share in China.

Formosa is already sold out for November, with sales targeting domestic and Chinese markets. Spot availability for December is also limited. Formosa received overwhelming response in recent months from majors, traders and blenders for the new Group 2 supplies, where the dominant producers are ExxonMobil in Singapore and South Korea's GS Caltex and S-Oil.

Formosa is negotiating with a trader for a spot cargo of N150 and N500 for arrival into Singapore in early January, sources say.

Formosa made its first domestic sales in October, after starting to produce on-specification lubricating base oil sometime in the second half of September.

The Mailiao 500,000 t/yr Group 2 plant is running at 100pc capacity, with monthly production expected at around 40,000t of N150 and N500.

Formosa has signed in-principle agreements with Shell, BP and Total for term contracts, with deliveries starting in January next year. But the parties are still working on pricing and quantity issues as part of the contractual commitments.

There is talk that one of the majors is planning to move its Formosa base oil supplies on a regular basis to Malaysia's Port Klang, selling small volumes to blenders in the region. Formosa is targeting traders, not blenders, as its sales terms specify a minimum quantity of 2,000t. Blenders, especially independents without storage, are restricted to smaller volumes of 200t to a maximum of 1,000t.

Formosa also requires the sale of spot cargoes to cover a ratio of 70-80pc of N150 and the remainder N500, which are not popular with blenders that need more of the heavier grade.

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19/12/25
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19/12/25

Viewpoint: Bitumen markets eye pockets of demand

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16/12/25
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16/12/25

US House clears hurdle to pass permitting bill

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EU eases ICE phase-out with 2035 CO2 car target: Update

16/12/25
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16/12/25

EU eases ICE phase-out with 2035 CO2 car target: Update

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