White Oil D40

Market Intelligence Report on White Oil D40 (Recent Developments)

1. Price Trends
- Domestic Market: White Oil D40 prices have shown slight fluctuations recently, with mainstream transaction prices ranging from 8,500 to 9,000 RMB/ton. In some regions, prices have reached up to 9,200 RMB/ton due to supply tightness.
- International Market: Influenced by fluctuating crude oil prices, FOB prices in Southeast Asia remain stable at USD 1,100–1,150/ton, while prices in European and American markets have slightly declined due to weak demand.

2. Supply Situation
- Domestic Production: The operating rate of major producers remains at 75%–80%. Some refineries have reduced output due to routine maintenance, leading to regional supply tightness.
- Import Volume: August imports decreased by 12% month-on-month, primarily because international suppliers prioritized long-term contracts with Europe and the Americas, resulting in reduced supply to China.

3. Demand Changes
- Downstream Industries:
- Base oil demand for lubricants remains stable, accounting for 55% of total White Oil D40 consumption;
- Cosmetic-grade white oil demand increased by 8%, driven by seasonal stocking;
- Rubber filler oil demand declined by 5% due to the off-season in the tire industry.
- Regional Differences: Demand is strong in the East China region, while it is weak in South China due to a decrease in export orders.

4. Costs and Profits
- Raw Material Prices: Prices for base oil raw materials (such as hydrotreated tail oil) remain firm, providing strong cost support.
- Processing Margins: The industry's average gross margin remains at 300–400 RMB/ton, unchanged from the previous month.

5. Inventory Levels
- Producer Inventories: Average inventory days have dropped to 12 days, below the industry safety threshold of 15 days.
- Trader Inventories: Trader inventories in East China have decreased by 20%, with stockouts observed in certain specifications.

Analysis and Judgment

1. Price Drivers
- Supporting Factors: High raw material costs, tight supply, and increased demand for cosmetic-grade products.
- Suppressing Factors: Weak demand from the tire industry and intensified price competition in international markets.

2. Supply-Demand Balance
- The short-term supply tightness is unlikely to ease soon. Demand shows structural divergence (stable lubricant demand, growing cosmetic demand, declining rubber demand).
- Low inventory levels amplify price elasticity, and traders are increasingly reluctant to sell.

3. Market Sentiment
- Buyers have limited acceptance of high prices, focusing mainly on rigid demand procurement.
- Sellers are strongly motivated to hold prices, with some companies suspending low-price shipments.

Forecasts

1. Price Trends
- Short-term (within 1 month): Prices are expected to remain high with fluctuations, with the mainstream range at 8,600–9,100 RMB/ton. Local prices may exceed 9,200 RMB/ton.
- Medium-term (3 months): If raw material costs remain high and supply does not recover significantly, prices may slightly rise to 9,300 RMB/ton. If downstream resistance intensifies, prices may fall back to 8,400–8,800 RMB/ton.

2. Supply-Demand Changes
- Supply Side: With the end of maintenance at some refineries in September, production may increase by 5%–8% month-on-month.
- Demand Side: Lubricant demand may grow by 3%–5% with the arrival of the autumn oil change season. The growth rate of cosmetic-grade demand may slow to within 5%.

3. Risk Alerts
- Significant fluctuations in crude oil prices may transmit to raw material costs.
- Changes in import policies (such as tariff adjustments) may affect the supply landscape.
- Unexpected declines in downstream industry demand (such as obstacles in tire exports).

4. Operational Recommendations
- Producers: Maintain reasonable inventory levels, monitor raw material price fluctuations, and prioritize supply for long-term contract customers.
- Traders: Restock as needed, avoid high-level stockpiling, and focus on regional price spread arbitrage opportunities.
- Downstream Users: Focus on rigid demand procurement and may appropriately increase safety stock to cope with short-term supply tightness.