Global demand volumes for general industrial oils and grease will decline 13% this year due to COVID-19’s impacts, consultancy Kline & Co. projected, but it added that opportunities loom in end-user industries such as transportation and power generation.
Kline forecasts that demand for these products – hydraulic fluids, industrial gear oils, turbine and circulating oils, compressor and refrigeration oils, and greases – will drop to 5.6 million metric tons in 2020 and then grow from 2021 through 2024.
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During a Sept. 9 online webinar, David Tsui, a project manager in Kline’s energy practice, said demand will not return to 2019 levels by 2024. “Not within that five-year period, by our projections,” he said. However, the company does anticipate about a 3% compound annual growth rate from 2020 to 2024, building off the projected decreased demand this year. “So they’ll be slightly recessed from original 2019 volumes,” he noted.
Tsui said that general industrial oils and grease demand had grown at a steady, modest 0.2% compound annual rate over the past five years. “It was growing more in certain regions and slightly declining in others,” he said. “It was originally forecast to grow a little bit more as economies picked up. However, COVID-19 really threw a monkey wrench into things.”
In 2019 global demand was 6.4 million tons, which constituted about 19% of overall global lubricant demand excluding process oils, Kline estimated. South America is expected to be one of the fastest growing regions for general industrial oils and grease consumption, he said. Among industrial oil types, Tsui said, North America accounted for about 20% of global industrial gear oil consumption last year, and – like Europe – has a higher prevalence of premium and synthetic lubricants.
According to Kline, Shell led in demand volume with a 15% share of the global industrial oils and grease market in 2019, followed by ExxonMobil at 12%. These majors are technology leaders with strong ties with original equipment manufacturers, Tsui noted, which helps them remain competitive against lower-priced domestic lubricant suppliers. Chevron, BP and Sinopec each had a 5% share. They were followed by PetroChina at 4%, Total at 3%, and Lukoil and Idemitsu Kosan, with 2% each.
He explained that domestic suppliers – including Brazil’s Petrobras – have significant shares in the global market due to their size and local policies that favor domestic suppliers. He noted that domestic suppliers have been advancing quickly in recent years and are expanding their reach.
Different industries experienced varying impacts during the pandemic. For example, he said, transportation equipment manufacturers were impacted greatly by COVID-19, whereas the power generation industry experienced a much lower impact. Many automakers had to shutter manufacturing sites for a time, as well as the sales side of their dealerships.
He said that in the coming years, opportunities exist in some of these industries, as well as challenges.
The transportation industry has a growing demand for technical support, especially fluid management services from original equipment manufacturers, “as the OEMs look to conserve, recover and reuse lubricants to reduce operating costs and the environmental impact of their operations,” Tsui said.
He noted that while global emissions regulations may seem to have fallen by the wayside due the impacts of the current pandemic health crisis, “they are still coming into effect for all forms of transport, and these industries will continue to drive technology upgrades, along with higher performance lubricants.”
The company expects the power generation industry to maintain growth during the 2019 to 2024 forecast period, driven by growth in power generation capacity. “Demand for turbine and circulating oils will grow the most, and it will remain the most dominant general industrial oil in this industry,” Tsui said. The company estimated that synthetic oils’ share will grow as turbines’ operating temperatures increase and turbines face increasing cold-cycling, as the renewable energy sector continues to grow at a rapid pace.
By contrast, Kline projects the primary metals industry to experience a moderate decline from 2019 to 2024. Tsui noted that an increase in adoption of predictive maintenance enables lubricant suppliers to work closely with customers. Product maintenance tools also help to monitor lubricant life and identify potential failures, he added. Near net shape has permeated the manufacturing industry and could eventually find its way into the primary metals industry, he said. Near net shape manufacturing technologies produce components that are close to the finished size and shape, requiring a minimal amount of finishing processes such as machining. “There is potential that casting ingots into near final shapes will help manufacturers save on machining, and therefore increase efficiency and reduce operating costs,” including for metalworking fluids, Tsui explained.