BRUSSELS-The $1 trillion economies of Brazil, Russia, India and China all have different development drivers and potential for growth, but consultancy Kline & Co. reports that by 2013, the lubricant markets of each had bounced back from the recession and outperformed the global market.
Brazil, Russia, India and China (referred to as BRIC by economists) are grouped together mainly because of the similarities in their population and economic growth rates, Kline & Co.s Milind Phadke explained to the 2013 UEIL Congress in October, and because they are the only $1 trillion economies outside of the Organization for Economic Co-operation and Development countries, which includes countries in North America and Europe.
Kline estimates that global lubricant demand was 38.7 million tons in 2012, which is close to the pre-recession high of 2007. Global demand growth for lubricants has largely shadowed the fluctuations in overall GDP growth, but the swings for lube demand in BRIC countries have been more pronounced: demand dipped farther south during the economic downturn and bounced back stronger in 2010.
Total lubricant demand in the BRIC countries was 12.8 million tons in 2012. China holds 60 percent of the market with close to 8 million tons. Commercial automotive and industrial lubricants accounted for around 3 million tons each, while consumer automotive lubricants was just over 1 million.
GDP growth in China has cooled in the past two years and will likely continue slowing. Brazils growth has mostly leveled off and will remain at current levels through 2030, Kline projects. India and Russia will see spikes through 2020, but then slight dips from those peaks by 2030. Despite variances between the countries growth rates, Kline estimates that all four will continue contributing to an increasingly larger share of global lube demand through 2022.
From a lubricants perspective, Kline considers China and India to be the most exciting of the four, due to rapid growth rates in both automobile and industrial production. In the past 10 years, energy use and steel production have shot up significantly in China and have been rising steadily in India, according to Klines data, sourced from the World Bank and World Steel Association. Fuel economy and emission controls are key drivers behind lubricant demand for India and China, Kline found, citing reasons such as Chinas smog epidemic and Indias increased dependence on imported crude as factors necessitating focus on higher quality lubricants.
Quality is steadily progressing in each BRIC country, with a rise in the usage of 5W-20, 5W-30, 5W-40 oils and 0W oils in passenger cars and a shift in heavy duty motor oils from monogrades and 20W-50s to an increasing prevalence of 15W-40s. Kline has also found that due to a healthy onslaught of API Group II and other high performance base stocks, BRIC countries demand for synthetic and semi-synthetic lubricants will grow accordingly.
Kline calls the lubricants markets of China, India and Brazil both highly competitive and extremely fragmented, with around 40 percent of base stock suppliers being neither international oil companies nor national oil companies, but instead, smaller regional companies. Brazil has seen a particularly large influx of international oil companies, which now account for about 40 percent of its entire supply while Petrobras, the national oil company, accounts for just around 20 percent. In contrast, Russia is primarily supplied by national oil companies, and gets just around 20 percent from big multinational players while minor suppliers provide a mere 10 percent.
Phadke concluded the presentation by reminding delegates that BRIC countries are vastly different from each other, and that each market requires a different strategy. He advised that the easy opportunities in each country have been swept up already, and that ongoing strategies for growing in these regions will be challenging.