Lubricant prices climb as Middle East crisis squeezes Bangladesh market

Highlights:

• Lubricant prices in Bangladesh have risen by up to 70%
• Global raw material shortages are driving the sharp increases
• Middle East conflict has disrupted base oil supplies and shipping
• Base oil prices have more than doubled since the crisis
• Retail prices for engine oils and transmission fluids are rising
• Bangladesh's import dependence leaves lubricants vulnerable to global disruptions

Lubricant prices in Bangladesh have risen sharply this year, with some products becoming up to 70% more expensive as higher international raw material and freight costs squeeze the market.

The latest increase in domestic fuel prices is adding to costs for vehicle owners, but industry insiders say lubricant prices are not directly linked to the government's fuel-price adjustment.

Rather, they attribute the surge primarily to global market conditions, particularly supply disruptions and higher costs linked to the conflict in the Middle East.

Md Delwar Hossain, senior vice-president of the Lubricants Importers Association of Bangladesh and managing director of RM Automobiles, said Bangladesh imports lubricants and the base oils used by local blenders largely from international markets, including the Middle East.

Infograph: TBS

Lubricant import prices initially rose by 5-10% in the first few weeks after the conflict began on 28 February, Delwar said. Since then, prices of some lubricant products have risen by as much as 70%, he estimated.

"The price surge in lubricants is not directly connected to the government's decision," Delwar told The Business Standard, saying the market is primarily responding to international developments.

He warned that if the situation in the Middle East remains unchanged, further price increases and instability could hit Bangladesh's lubricant market.

Md Shahin Alom, senior general manager of MJL Bangladesh, said the sharp increase is primarily linked to rising costs and tightening supplies of base oils, which account for roughly 75-98% of a lubricant's formulation, with additives making up the rest.

Disruptions to supplies from major Middle Eastern producers, including Qatar's Pearl GTL, and restricted shipping through the Strait of Hormuz have tightened global availability of higher-grade base oils, he said.

Base oil prices that were around $850-900 per tonne before the crisis have risen to $2,000-2,200, while synthetic base oil prices have exceeded $3,200 per tonne, Shahin said.

Retail prices already rising

The increase is already visible at retail outlets.

Md Rahmatullah, proprietor of Rahmat Motors, said prices of several popular lubricant products rose significantly between January and September.

A 4-litre pack of Mobil Special rose from Tk2,050 to Tk2,650, while Mobil 5W-30 increased from Tk2,600 to Tk3,500. A 4-litre pack of Mobil 1 rose from Tk6,200 to Tk7,200.

Transmission fluids have also become more expensive, with some products rising by several hundred taka to Tk2,000 per 4-litre pack. Japanese CVT FE oil, for instance, increased from Tk5,000 to Tk7,000.

Rahmatullah expects another round of hikes as retailers replenish stocks purchased at higher costs.

Mohammad Rasel of Fair Auto, a retail seller of motorcycle lubricants, said some engine oils have risen by around Tk100-200 per litre in recent months.

As a result, many customers are now calculating their expenses more carefully before making purchases, he said.

Iftekhar Shimul, a university student and regular motorcycle user, said he used to buy engine oil for Tk850 in January, but the same product now costs Tk1,150.

Import dependence exposes market

The Bangladesh Lube Blenders Association estimates the country's lubricant market at around Tk8,000 crore, with annual demand of 160,000-170,000 tonnes.

Domestic blending plants meet more than half of local demand, while the rest comes from imported finished lubricants. The automotive sector accounts for around 47% of total lubricant consumption.

Local blending plants rely entirely on imported Group I, Group II and Group III base oils, primarily sourced from Middle Eastern refining hubs.

Specialised additives are also imported, leaving producers exposed to international commodity prices, freight costs and exchange-rate pressures.

Shahin said shortages have been particularly acute for Group II and Group III base oils as refiners have faced incentives to divert some feedstock towards diesel production amid tight global fuel supplies.

The disruption has affected supply security as well as prices, with buyers facing difficulty securing some grades of synthetic base oils, he said.

Freight, dollar costs add pressure

The conflict has increased shipping risks and costs along maritime routes in the Persian Gulf and Strait of Hormuz, pushing up freight, insurance and transit costs for lubricant imports, Delwar said.

Industry insiders said importers are also facing pressure from foreign-exchange liquidity and letters of credit, while uncertainty over customs valuation of imported lubricants is adding to the cost burden.

Shahin said insurance premiums for Middle East shipments have risen sharply, while shipping disruptions and limited vessel availability are adding to the cost of bringing base oils and finished products into Asian markets.

Fuel hike adds to transport costs

The government's latest increase in diesel, petrol and octane prices has added further pressure on vehicle and fleet operators.

While the fuel-price adjustment does not directly determine lubricant prices, Delwar said, consumers are now facing higher costs for both fuel and vehicle maintenance.

Industry participants also fear that continued increases in genuine branded lubricants could push price-sensitive consumers towards lower-quality, recycled or counterfeit products.

For Bangladesh's lubricant market, the pressure is therefore coming from both higher domestic operating costs and its dependence on imported raw materials and an international supply chain exposed to geopolitical disruptions.