ILMA Compoundings - November/December 2020 - 15

U.S. Lubricant Production (thousand barrels)
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000

was able to restart soon after Laura passed, but Excel Paralubes was more directly in the path and remained offline
well into October. It accounts for 15% of U.S. capacity.
Phillips 66 received power by early October, but Hurricane
Delta delayed the restart timeline for its Lake Charles refining complex as the storm took nearly the same path as Laura.
Excel's outage and ongoing reduced rates by other refiners
kept the U.S. very tight. Base oil producers were focused on
supplying their domestic contract customers. Spot availability quickly dried up.
Supply was tighter for N220 and N600 compared with
N100. It was not likely that U.S. suppliers would have any
surplus until the first quarter of 2021.
PRICES FIRM ON TIGHT SUPPLY, IMPROVING DEMAND
Tight supply prompted a round of posted price increases
ranging from 15 to 30 cents/gal from mid-September to
early October. Buyers looked to secure additional volumes
from alternative suppliers with Excel shut, but producers
had a difficult time meeting the increased demand.
With suppliers focused on honoring their contracts and any
agreements in place prior to Hurricane Laura, spot activity
was largely muted. If it could be found, it was at a premium.
Demand was strong ahead of downstream finished lubricants price increases.
STRONG OVERSEAS DEMAND LIFTS EXPORT PRICES
Hurricane-related supply tightness also meant the U.S. was
no longer in a position to satisfy growing demand from
overseas markets, particularly India and Brazil.
August export volumes were at a three-year high for the
month despite ongoing recovery from COVID-19 on the
finished goods side, according to the ICIS database.
Volumes to India skyrocketed year on year in August and
more than doubled July's volumes. Year to date, volumes to
India are up by 41% compared with 2019. Supply was tight
in India, with limited availability from Asia or the Middle

0
2017

2018

2019

2020

East, so buyers looked to the U.S. despite the higher freight
rates it would take to get material.
Volumes to Brazil were 64% higher year on year in August
and 53% higher month on month. Volumes to Brazil were
down sharply during the second-quarter lockdown, so yearto-date exports are down by 25%. Local Brazilian supply
had been limited since June, driving an increase in demand
for U.S. material.
Strong overseas demand lifted Group II export prices
in line with domestic pricing, whereas it typically runs
at a 20-30 cent/gal discount, before the hurricane. PostLaura spot export prices firmed to premiums over contract
although little material was available.
FEEDSTOCK COSTS FIRM, SUPPLY SNUG
Feedstock VGO was also snug because of reduced refinery
rates, which was compounded by hurricane-related closures
of several U.S. Gulf Coast refineries, including Phillips
66 in both Lake Charles and Belle Chasse, Louisiana, and
CITGO in Lake Charles.
Belle Chasse was shut ahead of Hurricane Sally in
September but remained down and began planned maintenance early.
Tighter supply caused VGO to strengthen relative to
crude around late September. VGO had already been on a
firm upward trend for two months prior to Laura.
While costs were firm, base oil price increases outpaced
VGO increases, so margins were good on paper.
Hay is senior editor manager at ICIS. She may be
reached at amanda.hay@icis.com.

15



ILMA Compoundings - November/December 2020

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ILMA Compoundings - November/December 2020 - Cover1
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ILMA Compoundings - November/December 2020 - 1
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