MOSCOW – Russian blenders have good opportunities to export because the global demand for Russian lubricants is rising, according to a consultancys presentation at a lubricant industry event last week in Moscow. The question is whether blenders can take advantage of that trend when Russian lubricant output volumes are tumbling down due to the economic downturn.
The positive trends in the oil industry depend on the Russian economy recovering, which is not expected earlier than the beginning of 2010, an InfoTek-Consult official said April 21 at the Base Oils and Lubricants Russia and CIS 2009 conference. Russia’s gross domestic product dropped by 9.5 percent in the first quarter of 2009, compared to 2008’s first quarter, the ministry for economic development announced last week.
Tamara Kandelaki, director of InfoTek, said lubricants production in Russia has fallen over the last three years.
Production of lubricants in 2007 amounted to 2.54 millions tons, or 2.7 percent less than in the previous year. Russian blenders last year produced 2.45 millions tons, or a 3.4 percent drop compared to 2007, she said, adding that domestic consumption in 2008 slumped almost 7 percent from the previous year.
Kandelaki emphasized that prospects for higher production volumes would look brighter if government makes the right moves toward increasing Russias oil refining volumes, which will require a global economic recovery. Hence, InfoTek predicts domestic consumption will see drops of 10 to 15 percent in 2009 and the following two years, mainly in industrial and motor oils. It expects growing demand for high quality motor oils, while demand for lubricants used in economy-class cars and trucks will drop. They expect the same trends in marine lubricants.
Meanwhile, the global demand for Russian lubricants in 2008 jumped to 1.2 million tons, or 8 percent more than in the previous year. The consultancy said growth in global demand for Russian lubricants in 2007 was negligible, showing only a 0.5 percent increase.
Kandelaki said that higher global demand for Russian lubricants comes mainly from industrial giants China and India, which are not so affected by the global downturn, as well as from Central Asia and Afghanistan.
In contrast, imported products dominate the Russian lube market. Imported lubricants are growing year on year, catching up with the importing of automobiles and equipment.
The growth of imported lubricants in 2007 amounted to 316,000 tons or 26.5 percent more than in the year before. However, import growth slowed down last year, resulting in 20 percent more than in 2007, Kandelaki said. She said that in the first quarter of 2009, InfoTek observed a significant drop of import of lubricants in Russia, compared with the same period last year.
She advises foreign producers to invest in opening blending facilities in Russia because lubricants prices make a big difference to the Russian consumer. Its the only way they can be competitive with domestic products, Kandelaki added.
Looking at 2008 lubricant importers to Russia, Info-Tek said ExxonMobil holds the biggest part of the market with 23 percent, followed by 18 percent for Shell, and 9 percent for BP. Altogether they hold a half of the imports market in Russia. Kandelaki said that in terms of lubricants for business-segment cars, the Russian consumer is traditionally oriented to the top three foreign brands: Mobil, Castrol and Shell. Thats not the case for consumers who are in the economical-segment cars – that market niche is reserved for domestic brands of the Russian oil giants LukOil and TNK-BP.