“You’re going to see a lot more demand for metalworking fluids, and motorcycle oils is one of the higher growth categories as well,” David Tsui, a project manager in Kline & Co.’s energy practice, said during an online webinar on Sept. 7. Although the projected growth rate for passenger car motor oil and heavy-duty motor oil is lower, Tsui said, they are still projected to account for a large portion of the region’s lubricant demand volume, so they will continue to represent significant growth in overall demand volume.

In Latin America and the Caribbean region, Brazil, followed by Mexico have the highest lubricant consumption and accounted for more than half of the 3.9 million tons of demand. Tsui noted Argentina and Colombia are also significant-sized markets in the region.

Heavy duty motor oil and passenger car motor oil accounted for almost half of the region’s demand last year.

He noted the Latin America and Caribbean region experienced a much greater impact from COVID-19 shutdowns than other regions, with a 16.4% decline in gross domestic product in 2020. “The good thing is they recovered quite quickly,” he said. “2021 saw 15.4% growth, which almost brought them back to pre-pandemic levels.” For full year, 9% GDP growth is expected.

“This has been largely reliant on rapid recovery in the industrial segment, with manufacturing, mining and tourism really helping lead the way there,” Tsui explained. “This in turn also helped the commercial segment, as raw materials, goods and transports required the commercial fleet to be active.”

Tsui said that the top 20 suppliers in Latin America and the Caribbean accounted for a nearly 80% share of the estimated finished lubricant supply last year. The top global major lubricant suppliers in the region were ExxonMobil, Shell, Chevron, Total Energies and BP, Kline found. The top five regional or national oil company suppliers in the region were Iconic, Vibra Energia, Petronas, Mexilub and YPF S.A.

In Latin America specifically, finished lubricant demand slipped from around 3.8 million tons down below 3.3 million tons in 2020, Kline found. It rebounded to just shy of the 3.8 million tons mark in 2021.

On the consumer lubricant demand side in Latin America, the leading markets last year were Brazil and Mexico. Latin American still consumes a lot of heavier viscosity grade motor oils and a significant portion of monograde engine oils, Tsui pointed out. The vehicle parc’s older age is only one reason, he said. “It’s more the cultural preference for heavier viscosities,” he said, along with the consumers’ belief that those viscosities work better in hotter, dirtier climates that don’t have as many hot and cold swings as other regions.

On the consumer side, he said, monogrades continued to account for almost a fifth of heavy-duty motor oil demand last year. “The other issue has been price sensitivity,” he added. “The smaller fleets, as well as owner-operators, favor reducing expenses, so they prefer the cheapest oil. And generally speaking, older monograde, older spec fluids to be less expensive, so they favor those.”

As the manufacturing base in Latin America recovers, he said, “you’re going to see a lot more growth in hydraulic fluids, but also in rail and marine.” Growth may also occur in lubricants for turbine and circulating oils as power grids get upgraded, he noted. The industrial lubricant category in the region is also price-sensitive, he said, and people there tend to favor use of more traditional fluids and not so much newer synthetic lubricants.

On the consumer side, one factor aiding demand growth is the use of motorcycles. The pandemic brought lockdowns that resulted in increased purchases of motorcycles, which held appeal as a means to avoid public transportation and which many out-of-work owners used to perform delivery jobs. “We really saw sales in a lot of these countries for motorcycles pick up quite a bit in 2021 and 2022,” he said, noting that because of this growth, manufacturers of both domestic and Asian motorcycles are ramping up production domestically in the region. “We’re expecting to see a lot more growth and demand for motorcycle engine oils and lubricants,” he added.

The varying levels of green environmental policies and investment will affect the individual countries differently, Tsui noted. Those with stricter and enforced green policies are putting money and effort into building infrastructure. Those countries will see much more growth in infrastructure, such as wind turbines and natural gas power plants, he said, which will help bring greater demand for lubricants for them.

On the emissions side, he noted that countries in the region that put into effect tighter emission policies for commercial and consumer vehicles will likely result in a newer vehicle parc that forces many older vehicles off the road. “Then they will se a greater shift and demand for higher API service categories, and increased demand for lower viscosity fluids as well,” Tsui said.

According to Tsui, Mexico is seen as the country with the greatest nearshoring potential in the Americas. Nearshoring is generally defined as transferring business operations or processes to a nearby country instead of to a more distant one. He noted that pandemic-related lockdowns, supply chain disruptions and growing freight costs have made nearshoring the latest supply chain trend.

The study is titled, “Opportunities in Lubricants: Latin America and Caribbean Market Analysis.”