US paraffin wax production drops as base oil feedstock limitations persist through second quarter
HOUSTON (ICIS) – Wax production in the United States slips to historically low levels as limited base oil feedstock availability continues through the remainder of the second quarter.
According to the latest figures from the US Energy Information Administration (EIA), US production of paraffin wax fell to 65,000 barrels in February, the lowest monthly volume recorded by the entity since 2005.
The drop materialized when the polar storm in mid-February decommissioned significant base oil load capacities and refiners were then faced with unscheduled maintenance.
Paraffinic base oil production also fell to new lows in February, according to the latest EIA data.
According to CIHI data, approximately 42% of the virgin base oil capacity was disconnected during Polar Storm Uri.
Already tight supplies were offset by base oil recoveries heard earlier in the year, creating a tighter squeeze on global inventories as the second quarter approached.
PetroChina’s refinery in Fushun, China, a major producer of base oil and wax, also remains in recovery through the end of the month.
While U.S. refinery utilization has exceeded 85% in recent weeks, production rates remain below the typical three-year median of around 90%, which could indicate lower-than-normal base oil operations in the near future.
A slight increase in paraffin wax imports and a decline in exports to close the first quarter left the trade situation largely unchanged.
According to the ICIS Supply and Demand Database, wax imports to the United States in March increased slightly from the previous month with just over 17,000 tonnes, mostly from Canada, China , Japan, Malaysia, South Africa and Taiwan.
Imports from China’s key production center were up 33% from February.
Meanwhile, US wax exports declined slightly from February’s total volume of around 3,000 tonnes, with most shipments going to Australia, Canada, China and Mexico.
PRICES PRESSURES TO GO FURTHER
An already strained supply situation in the United States is compounded by increased inflationary pressures nationally, which precedes an active summer production season for refineries.
Slackwax market sources indicated price increases slated for mid-May as extremely limited stocks forced any new ventures for the coming months. Possible price increases for June have been heard, but not widely confirmed.
So far, significant price pressure on the supply side is likely to be felt with increasing demand ahead of the candle selling season expected from the end of the third quarter and the start of the fourth quarter.
Alternatives to fully refined paraffin wax, such as alpha-olefin wax and soy wax, are plentiful and competitively priced. Substitutions, if paraffin wax supplies remain tight, could reduce demand.
Paraffin waxes are widely used in candle making and in the packaging industry as wax coatings for paper, film and sheet substrates including corrugated cardboard, cups and containers. .
American wax producers include ExxonMobil, HollyFrontier and Calumet.
Focus article by Adam burkin
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The miniature image shows candles, which are made with paraffin wax. Image by Shutterstock