Asia holds around 36% of global rerefined base oil capacity, driven largely by China, while Europe accounts for about 29%, underpinned by mature collection systems and strong policy support. The Americas and the Middle East/Africa make up the remainder of the market.

“Major capacities in Asia are concentrated in China, while Group II and Group III base oil capacities are developing in North America and Europe,” Anwesha Banerjee, Frost & Sullivan’s principal consultant, told delegates at the ACI European Base Oils & Lubricants Summit held here Nov. 26.

Global rerefined base oil supply currently totals around 4–5 million metric tons, with growth of 2–3% projected over the next five years, she said.

Banerjee stressed that rerefining is no longer a niche activity but an industry-wide structural trend. “Rising demand for premium Group II/III base oils and an accelerated focus on sustainability have elevated the strategic importance of rerefining,” she said, noting that rerefined base oils are increasingly viewed as “an effective tool to reduce the carbon footprint along the value chain.”

This expansion is unfolding despite sluggish growth in overall lubricant demand. Frost & Sullivan expects global lubricant volumes to remain modest, yet rerefined base oil demand to continue rising.

“RRBO demand will grow despite declining lubricant demand, driven by stricter collection targets and supportive policy measures across countries,” Banerjee said.

Europe at the Regulatory Core

Europe sits at the center of this transition. The consultancy expects rerefined base oil content in European lubricants to exceed 20% by 2033, supported by tightening regulation. Proposed revisions to the European Union’s Waste Framework Directive aim to lift used-oil collection rates to at least 80% across all member states by 2030, complemented by extended producer responsibility schemes and green public procurement rules.

“Europe benefits from extended producer responsibility schemes that prioritize collection,” Banerjee said. “The EU already collects nearly 90% of collectable waste oils.”

In volume terms, Europe produces 6 million–7 million tons of lubricants annually, collects about 2.5 million tons of used oil and rerefines roughly 1.5 million t/y, of which 800,000–900,000 t/y are rerefined base oils. More than 16 active rerefiners operate across the region.

Italy was highlighted as a model market, supported by strong national targets and incentives. The country’s lubricant demand of about 400,000 tons last year resulted in roughly 185,000 tons of collected used oil and around 117,000 tons of rerefined base oil output. Under its extended producer responsibility framework, the consultancy expects Italian rerefined base oil demand to grow by around 1.3% through 2027, even as lubricant demand flattens.

Oversupply Shapes the Investment Case

The rerefining push is taking place against a backdrop of oversupply in the wider base oil market. Frost & Sullivan estimates global base oil demand at roughly 34–35 million metric tons in 2024, compared with supply of about 35–36 million tons, creating what Banerjee described as a current oversupply situation.

“Demand for Group II/III will grow at the expense of Group I,” she said, resulting in continued capacity growth in Group II, Group III and Group III+, both virgin and rerefined. In this environment, rerefined base oils are gaining importance as a source of circular, high-quality Group II/III output.

That shift is increasingly reflected in investment decisions. In the United States, Vertex Energy said its hydrocracker in Mobile, Alabama, is now producing VTX-R4, a 4-centistoke Group III rerefined base oil. The unit is the third component of the company’s integrated collection, processing and rerefining chain and allows Vertex to serve both domestic and international lubricant markets from its Gulf Coast location, leveraging existing logistics infrastructure.

Another consultancy, Kline & Co., forecasts global rerefined base oil capacity to rise to around 5.2 million metric tons by 2028. Of this, Group III capacity growth is most pronounced in the United States and Asia, reflecting rising demand for premium, low-carbon base stocks.

Several major projects support that outlook. ExxonMobil expanded its rerefined base oil capacity at its refinery in Port-Jérôme, France. Pennzoil recently introduced its first fully regenerated racing oil as a minority shareholder in Blue Tide, a U.S. rerefiner that has completed a large-scale rerefinery – developments that could eventually influence European imports of rerefined Group II/III material.

In Asia, HD Hyundai Shell is targeting commercial Group III production by 2027, while Hindustan Petroleum Corp. Ltd plans to increase Group II+ and Group III capacity between 2027 and 2028.

In Europe, TotalEnergies has strengthened its position through the acquisition of Finland-based rerefiner Tecoil, while Castrol has partnered with Slicker Recycling to develop circular oil-management solutions in the United Kingdom.

“Capacity additions clearly show where the market is heading,” Banerjee said. “We expect growth to be concentrated in high-quality Group II and Group III rerefined base oils, aligned with performance requirements and circularity goals.”

Frost & Sullivan views the sector’s evolution as irreversible.

“Rerefining is evolving from a niche activity to a well-recognized mainstream component of the circular lubricant economy,” Banerjee said.

While near-term uptake remains strongest in business-to-business segments – industrial manufacturers, fleets and OEMs – she expects broader adoption over time.

“B2C adoption will build as brand confidence and OEM endorsements expand,” she said.

For delegates at this year’s European base oils and lubricants conference, the message was clear: rerefined base oils are no longer a side story, but a core pillar of the future base oil market.