Domestic base oil and lubricant delivery was crimpled as the government strengthened supervision on the exclusive use of railway tankers for distillates products transportation as from Mar 1, according to sources from domestic base oil and lubricant markets.
China's Railway Bureau forbade delivering base oils and lubricants with distillates railway tankers since 2010, a Northeast China-based base oil trader denoted. But many regional railway authorities did not strictly implemented the regulation, thus base oil and lubricant traders had been able to transport their cargoes with railway distillate tankers, he said.
However, thanks to stricter supervision, many domestic traders would have to deliver their cargoes with special railway tankers for base oil and lubricant delivery only, he said. But such railway tankers were mostly taken up by domestic large refineries, so domestic traders were faced with tight availability of commercial tankers, he pointed out.
Under these circumstances, some traders turned to other delivery modes, which cost them higher freight rates, a Northeast China-based market player said.
For example, for traders who delivered base oils and lubricants with containers, the freight increased Yuan 50-100/mt. Some packaged their cargoes in smaller plastic bags and delivered them with non-special use railway tankers, but costs gained Yuan 50-100/mt. Some transported cargoes by truck, but costs boosted Yuan 100-200/mt, he illustrated.
Higher freight rates further weighed on domestic private lubricant plants, opined an industry source. They had been trapped in paper-thin production margins since the start of the year, when feedstock prices kept soaring, he explained.
