DUBAI, United Arab Emirates – Its time to take off the rose tinted glasses; global finished lubricant demand will decline through 2013, and barely return to current levels by 2017, predicted Stephen B. Ames.
Gross domestic product is a very good indicator of lube demand, Ames told the ICIS Middle Eastern Base Oils & Lubricants here earlier this month. Based on the International Monetary Funds GDP projections in its October 2012 World Economic Outlook, Ames expects global lubricant demand to decline 0.7 percent this year and drop another 0.4 percent next year. Ames is principal of SBA Consulting LLC, based in Pepper Pike, Ohio.
SBA Consulting estimates that global lubricant demand peaked most recently at 38.4 million tons per year in 2007. It sunk to 33.9 million tons in 2009, and climbed back to 36.9 million tons in 2011.
History has taught us that there has been no global lubricant demand growth in the past 20 years, Ames said. However, the pundits kept forecasting growth, for four primary reasons.
First, said Ames, we overlooked the frequency and impact of global and regional economic downturns. Second, we underestimated the effects of lubricant advances and efficiency improvements in machinery and equipment. Lubricants are an operating cost to whatever they lubricate, he noted, and industry is always seeking ways to reduce costs.
A third omission the prognosticators have made is missing the future impact of changes induced by legislation around the world. Many of these, such as CAF and CO2 limits, lead to lower lubricant consumption. Likewise, lower government fuel subsidies and higher fuel taxes is curbing miles driven, and thus curbing lube demand.
Finally, said Ames, until now weve overlook the relationship between lube demand and GDP growth.
Comparing lubricant demand with GDP shows a lock step relationship, offset by an average of 4 percent over the past 15 years, he asserted. The formula tracks exceedingly well globally; its less robust for individual countries due to cross-border lubricant imports and exports.
|
Global Lubricant Demand Forecast |
||
|
% Global GDP Growth |
% Lubes Growth |
|
|
2010 |
5.3 |
1.3 |
|
2011 |
3.8 |
-0.2 |
|
2012 |
3.3 |
-0.7 |
|
2013 |
3.6 |
-0.4 |
|
2014 |
4.1 |
0.1 |
|
2015 |
4.4 |
0.4 |
|
2016 |
4.5 |
0.5 |
|
2017 |
4.6 |
0.6 |
Source: SBA Consulting LLC; global GDP from IMF World Economic Outlook, October 2012
Even during the 2004 to 2007 boom/bubble years with no economic downturn, Ames pointed out, the global lubricant growth rate averaged only 0.8 percent.
Although little growth is foreseen globally, demand is strongly moving eastward, he continued. In 2006, Asia Pacific accounted for a third of global demand, while North America consumed more than 24 percent. By 2017, Asia Pacific will consume over 47 percent of the worlds lubricants, while North Americas share will shrink to just over 17 percent.
Nevertheless, Ames said, opportunities will prevail in the emerging markets and for advanced, higher specification and eco-lubricants in all regions.