Price Adjustments - Lubricants, Base Oils, Additives, and others
December 8, 2023
More Base Oil Price Decreases
Safety-Kleen announced that effective December 8, 2023, the company will decrease the posted pricing on KLEEN+ RHT120 and RHT240 by $0.30 a gallon.
The following is a summary of recently announced decreases in the posted price of base oils.
Although there was one announced increase in the posted price of base oils in 2023, base oil postings will close out the year at close to $1.10 below where they were at the start of the year. This is due to three announced decreases in base oil posting in the first half of the year, and a fourth in November/December.
The slide in base oil prices started in September 2022 when posted prices decreased by roughly $0.40 a gallon, depending on type and grade. This period also marked a time when distributors were saying that demand for lubricants seemed to have “fallen off a cliff.”
It became clear as we moved into 2023 that while lubricant demand may not have fallen of a cliff, it was certainly in slump and the slump persists. With that, there is little wonder why we are now seeing base oil prices again drop. Base oil tanks are full and producers can’t simply turn off the spigot.
Finished lubricant Price Increases
For the first time this year, we are now seeing price increase announcements on finished lubricants. For many, this does not come as a surprise considering that the posted price of base oils has moved up twice over the past 30 days. When taken together, these increases lifted the price of base oil up by close to $0.60 a gallon. In addition, there have recently been increases in the cost of plastic packaging (i.e., bottles, pails) ,other components used in the manufacturing of lubricants and grease, and higher transportation costs.
The chart at the right is a summary of lubricant price increases reported in September 2023.
Base Oil Price Increases
While 2023 started with three announced decreases in the posted price of base oils (see graphic below), the Motiva and ExxonMobil adjustments are the second time this year when there has been an announced increase in prices.
A first round of base oil price increases occurred last month when producers announced an increase in posted prices ranging from $0.20 to $0.50 a gallon, depending on type and grade.
- Motiva Enterprises announced an increase in the posted price of its base oil. The API Group IIs (aramcoPRIMA 100, 220, and 600) will increase by $0.30 a gallon, and Group III (aramcoULTRA 2,3,4,6, and 8) will move up by $0.15 a gallon. The adjustments are effective on September 15, 2023.
- ExxonMobil advised blenders it will increase base oil postings, effective September 20, 2023. The posted price of API Group I AC 100, 150, 600 and SN 115, 150, 330, 400, and 800 will be lifted by $0.20 a gallon. Group II EHC 45 and 120 will move up by $0.20 a gallon, and EHC 65 will increase by $0.15 a gallon. The posted price of AC 2500, and EHC 20L will remain unchanged.
The chart at the right is a summary of base oil price increases reported in September 2023.
Following three rounds of decreases in the posted price of base oils in 2023, base oil producers are now announcing increases in posted price.
In the views of blenders and distributors JobbersWorld spoke with, the increases are unexpected and perplexing. Although the price of crude oil has been trending up for the last six weeks, demand for lubricants remains relatively soft and word on the street is that base oil supply is long. At the same time, concern remains that the upward trajectory of crude oil prices will continue due to falling inventories and this could push base oil prices even higher as we approach 2024. The drop in inventories is, in part, a function of deep production cuts in Saudi Arabia and record high demand in some regions of the world.
The following is a summary of recently announced increases.
Another round of adjustments to base oil price postings announced in June 2023. The following is a summary of the adjustments.
The first quarter of 2023 was extraordinarily quiet in terms of announced price changes in base oils, additives and finished lubricants. Importantly, however, while JobbersWorld is aware of only two officially announced decreases in the price of finished lubricants in Q1 2023, prices have been trending down (significantly for some products) over the past four months.
The downward pressure on finished lubricant prices is due to soft demand, and what many distributors say is very aggressive pricing by some majors. It is believed some majors are dropping prices to regain the market share lost when they ran low, or simply out of product last year due to interruptions in additive supply. There was considerable supplier switching during that time as a result of allocation and stock outs for some major brands. This was particularly notable for HDEO, PCMO, and some gear oils.
Interestingly, marketers say that majors engaged in such discounting to claw back market share are focusing the price reductions on their second tier HDEOs and PCMOs rather than their marquee labels.
Pressure on finished lubricant prices intensified following announcements by base oil producers late March and into April that they were decreasing posted prices. While the base oil price decrease offers blenders relief, it’s important to consider that margins have compressed significantly this year due to the intensity of competition. In addition, inventories are high as a result of soft demand.
The following is a summary of the adjustments.
- Chevron announced a general posted price decrease on lubricants of up to 8%, effective January 12, 2023. While the decrease applies to many of its lubricants, it excludes automotive gear oils, transmission fluids, industrial gear lubricants, and coolant and fuel additives. In addition, while the posted price of many of Chevron’s lubricants will decrease, marketers were advised that the posted price of Chevron’s greases will increase by up to 17%, effective February 13, 2023. The increase is said to be due to higher costs on raw materials, packaging, and overall supply disruptions.
- CITGO announced a general posted price decrease on select lubricants of up to 8%. The decrease went into effect January 13, 2023. The adjustment applies to most of the company’s lubricants, including conventional HDEO and PCMO, and the majority of its hydraulic oils, THF, and others. The price of CITGO grease and selected specialty lubricants will, however, increase by up to 17%. The increase applies to synthetic industrial lubricants, full synthetic HDEO and PCMO, Clarion and fire-resistant lubricants. The upward adjustments are effective February 13, 2023. CITGO attributes the need for the increases to escalations in component costs and continued supply constraints.
Although lubricant manufacturers and distributors in 2022 had to navigate through less chaos than seen in 2020 and 2021 during the pandemic, business was still far from settled. Many of the supply chain challenges and cost pressures seen during the pandemic rolled forward into 2022, and there were some new and unwelcomed challenges to overcome as well. For many, the most demanding was the severe shortage of lubricant additives. The following is a look back at the business in 2022 and a peek into what may lie ahead.
In addition to attributing the need for the price adjustments to ongoing increases in the cost for raw materials, and significant increases in the cost of packaging and freight, a number of lubricant manufacturers advised customers that they may experience extended lead times and order delays due to industry-wide shortages. More about 2022>>
The following table provides a summary lubricant price adjustments in 2022.
There were eight rounds of lubricant price increases announced in 2021, one of these increases (occurring in Q4) primarily affected synthetic lubricants.The number and magnitude of increases seen in 2021 contrasts sharply with an average of two price increases seen annually from 2010 to 2020, and many years prior. In addition to the record-breaking number of increases, the magnitude of the adjustments was also remarkable.
Where price increase announcements historically range from 6 to 8% over the past 10 years, and a few percentage points lower in prior decades, the eight increases announced in 2021 on average was approximately 14% each. When taken together, these increases moved the price of lubricants up by $2.50 to $3.50 a gallon and higher.
Each of the lubricant price increases were driven by the higher cost of raw materials and other inputs, and short supply. The price of Group II base oil increased by close to $2.00 a gallon, and Group III by just over $3.10. There were three (four counting the one that bridged 2020/2021) lubricant additive increases in 2021 and they moved additive prices up by 25 to 30%. The magnitude of the combined increases varied by additive type and other factors.
Adding to these cost burdens, other inputs also increased, including:
- Transportation costs jumped by 30 to 35% over pre-pandemic levels.
- The costs to get urgent loads for inbound raw materials or outbound shipments to customers increased dramatically in 2021 due to the severe supply chain shortages.
- Jug prices went up $0.10.
- Pail prices increased by close to $0.45.
- New one-way totes went up close to $20.
- New drum prices increased to over $40 and were challenging to source.
- Pallet prices hit record highs, up close to 50%, and supply struggled to keep pace with demand.
- Freight costs went up 30 to 40% and it was very difficult to secure bulk truck carriers.
The following table provides a summary lubricant price adjustments in 2021.
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