Lubricant Prices Sliding
As reported in JobbersWorld over the past two months, most lubricant manufacturers announced general increases on listed lubricant prices. The increase had effective dates ranging from mid-October to mid-November and ranged in magnitude from up to 12 to 15%.
Nearly all of the price increase notifications attributed the need for the adjustments primarily to increases in the cost of base oils and additives. The base oil increases included one in August and another that followed shortly after in September. When taken together, they lifted the price of base oil up by close to $0.60 a gallon. In addition to base oil, additive prices increased by up to 8% over the past two months. Adding to the finished lubricant price justifications were increases in the cost of packaging and freight.
As is typically and understandably the case, when blenders announce increases, lubricant distributors soon follow. While distributors did in fact announce price increases (as shown below), word on the street is that the adjustments are not sticking. And according to many marketers, the reason they are not is due to sluggish demand and the intensity of competition this has generated in the marketplace.
Importantly, although some are pulling back on the recently announced lubricant price increases, blenders are finding some relief in the cost of goods due to base oil prices retreating.
Soft demand for finished lubricants also means the same for base oils and additives. But, while blenders say that the recent additive price increases are holding, base oil prices are trending down, as seen by the recently announced decreases in base oil postings by Chevron and Motiva. In addition, spot prices were very competitive prior to the announced base oil decreases. The base oil market in the US is currently long and suppliers are working to move product and reduce inventory by way of price reductions prior to year’s end.
Although the price reductions are occurring across most types and grades of base oils, light grades (i.e., 60 and 70N) are particularly long. The overhang in these grades is driving deeper discounting than seen in others. In addition to the soft pricing, concern here is that the softening in demand for lighter grade neutrals is organic and continuing, and as such, will likely be long standing.
So, while there is a blip on the chart showing both base oil and finished lubricant prices increasing in the second half of 2023, both are sliding back down as we close out the year.
