Shifting Basestock Demand
“The rate of Group I refinery closures seems to have slowed over the past couple years or so. “ says Ian Macpherson, senior marketing manager for Afton Chemical Corp. “The value of some of the specialty products that are produced by some of these Group I refineries (such as brightstocks, etc.) may have now increased sufficiently to make the Group I refinery economics more appealing – time will tell.”
A 2009 study by Kline and Co. concluded that demand for API Group II base oil is steadily displacing Group I in automotive and industrial applications. The Kline study forecasts growth for niche players focused on specialty products entering the Group I market – process oils and waxes rather than basestock.
In discussing the study during a Web presentation, Milind Phadke, project manager for Little Falls, N.J.-based, Kline’s Energy Practice said that both supply and demand of API Group I basestock has steadily declined over the last 10 years, adding that this is primarily due to technical obstacles of Group I basestock for automotive applications (Group I basestock can no longer be used in most passenger car motor oils and heavy-duty motor oil application). Because of this, many Group I producers are faced with the decision to either shutter or shift production to a higher Group.
Not surprisingly, this has had the effect of increasing demand for Group II and III basestocks significantly. Phadke points out that the increasing demand has led to increased supply, which has led to a surplus of Group II basestock, leading to this basestock being used in applications where Group I basestock would suffice. The Kline Study also predicts that Group III demand will nearly double between 2009-2019.
1. From: http://www.imakenews.com/Ing/e_article001788014.cfm?x=bh3yBk8,bb3qHGP3.
2. For more information on the study, visit: www.klinegroup.com/reports/y618series.asp