HOUSTON (ICIS news)--US base oils buyers are calling for a change in how future contract prices will be determined, industry participants said on Thursday.
We have told sellers at NPRA that we want a new pricing structure, which may result in a base oils price that is not just a discount off posted prices, a large-volume lubricants buyer said at the National Petrochemical and Refiners Association (NPRA) International Lubricants and Waxes conference.
The timescale would depend on when individual contracts expired, so the end of the year would be an appropriate time to change, but it could be as long as 2010 before anything is done, the buyer said.
Since Exxon s surprising move in August, the market has been contemplating how to get prices in check, a seller said.
ExxonMobil announced plans to lower its American Core 100 viscosity base oil stocks by 40 cents/gal effective 23 August amid a firm market. The decrease came just after other producers had issued hikes of up to 10 cents/gal on posted prices based on high feedstock crude costs.
Sellers and buyers said the move was an attempt to move the posted price more in line with actual spot market activity.
The price on the spot market for the 100 grade ranges from $2.25-$2.55/gal, while ExxonMobil s posted price was actually over $3.00/gal before the move, according to global chemical market intelligence service ICIS pricing.
US base oils contracts are generally a discount off posted prices. Posted prices are determined by the seller and never negotiated.
But over the years, the posted prices have drifted out of line with actual spot market activity, a buyer said.
Some buyers have suggested a formula price based off the costs of raw materials; while others have suggested a discount off published spot prices.
We re looking at contracts that would be fixed margin and involve raw material costs plus X, and X is still to be determined, a buyer said. X would be determined by the supplier and be a number to represent operating costs.
It all looks good on paper, a seller said. But many factors need to be considered, especially any unplanned supply issues.
We have told sellers at NPRA that we want a new pricing structure, which may result in a base oils price that is not just a discount off posted prices, a large-volume lubricants buyer said at the National Petrochemical and Refiners Association (NPRA) International Lubricants and Waxes conference.
The timescale would depend on when individual contracts expired, so the end of the year would be an appropriate time to change, but it could be as long as 2010 before anything is done, the buyer said.
Since Exxon s surprising move in August, the market has been contemplating how to get prices in check, a seller said.
ExxonMobil announced plans to lower its American Core 100 viscosity base oil stocks by 40 cents/gal effective 23 August amid a firm market. The decrease came just after other producers had issued hikes of up to 10 cents/gal on posted prices based on high feedstock crude costs.
Sellers and buyers said the move was an attempt to move the posted price more in line with actual spot market activity.
The price on the spot market for the 100 grade ranges from $2.25-$2.55/gal, while ExxonMobil s posted price was actually over $3.00/gal before the move, according to global chemical market intelligence service ICIS pricing.
US base oils contracts are generally a discount off posted prices. Posted prices are determined by the seller and never negotiated.
But over the years, the posted prices have drifted out of line with actual spot market activity, a buyer said.
Some buyers have suggested a formula price based off the costs of raw materials; while others have suggested a discount off published spot prices.
We re looking at contracts that would be fixed margin and involve raw material costs plus X, and X is still to be determined, a buyer said. X would be determined by the supplier and be a number to represent operating costs.
It all looks good on paper, a seller said. But many factors need to be considered, especially any unplanned supply issues.
