The EU Commission and member state representatives will meet today and tomorrow to discuss the Group II base oil import quota for January to December 2022.
The quota of 200,000t for the first six months of this year will fall to 150,000t for the second half of the year following a decision made in January.
Lubricant associations are lobbying for a higher quota and a longer transition phase based on their view that Group II base oil demand in Europe exceeds supply. One member state supports the reduction and gradual phasing out of the quota.
The quota for the first half of this year is 200,000t of Group II N150, N220 and N600 from countries that do not have a free trade agreement (FTA) with the EU. Imports above the quota are subject to a 3.7pc import tax.
The quota mostly affects Group II imports from the US. Singapore, South Korea, Japan and Canada have FTAs with the EU.
Total supplies from overseas markets to Europe have been falling steadily in recent years.
US base oil and lubricant exports to Europe reached 145,000t in the first two months of this year, up by 17pc on year-earlier levels, but a slump in supplies from Asia outweighed that recovery. Group II exports from Asia to Europe fell to 6,500t in the first two months of this year, 92pc lower than year-earlier levels, according to Argus calculations. The slowdown mostly reflected a halt in exports from Singapore to Europe since April 2020.
Exports from both the US and Asia also fell in the second half of 2020.
US exports of 347,550t in the six months to December 2020 were down by 15pc from year-earlier levels. Exports of 18,600t from Asia to Europe in the six months to December 2020 were 91pc lower than year-earlier levels.
The EU import quota was implemented from the start of 2020 following the start-up in early 2019 of a new 900,000 t/yr Group II base oil unit in the Netherlands. The unit was Europe's first such virgin Group II base plant.
European Group II prices have been rising since August 2020 in response to tight supply and strong demand. The fall in exports to Europe in the second half of last year coincided with regional maintenance in the third quarter that slashed output.
The shortage of Group I availability in Europe this year has added to growing demand for more premium-grade Group II base oils.
Group II spot prices have climbed this month to their highest since at least 2013, when Argus began European Group II price assessments.
