U.S. Leads North America’s Rebound

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U.S. Leads North America’s Rebound
A customer considers an engine oil purchase at an automotive parts store. ©Kardasov Films

North American lubricant demand in 2021 almost recovered to pre-pandemic levels, driven by strong growth in the United States’ market. Despite inflation, rising raw material costs and supply chain disruptions, North America’s total lubricant demand reached 97% of the 2019 total, consultancy Kline & Co. found.

As COVID-related restrictions were gradually lifted, “business starting back to normal, people started stepping out for work, holidays and other activities, and demand for lubricants saw a great recovery in 2021,” Pooja Sharma, a project manager within Kline’s energy practice, said during a webinar on Oct. 27.

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Shell was the leading supplier of lubricants in North America in 2021, according to Kline, with a 10-15% share, followed by ExxonMobil, Chevron, Phillips 66, Valvoline, BP, HollyFrontier, Citgo and Mexlub.

The U.S. accounted for 83% of North American demand in 2021, followed by Mexico with 9% and Canada with 8%. U.S. finished lubricant demand plunged by almost 10% in 2020 to around 2.2 billion gallons, before rebounding to 2.4 billion gallons – 97% of 2019’s demand – in 2021.

Passenger vehicle lubricant consumption dipped the most – by nearly 30% – in 2020 due to the pandemic, while the region’s overall demand fell by about 25%.

Economic Growth

Sharma noted the U.S. economy picked up in the second half of 2020 and its gross domestic product bounced back in 2021, growing by nearly 6% and surpassing the country’s GDP in 2019.

“The disposable income of consumers in the U.S. grew strongly in 2021, and household consumption expenditures returned to pre pandemic levels, as a result of which the expenditure on personal vehicles increased, the expenditure on travel increased and overall mobility increased in the region,” she said. “Driven by all of these factors, the demand for lubricants recovered pretty strongly in the US in 2021, both in the automotive and industrial segments.”

Factors that kept the U.S.’ lubricant demand recovery short of 2019 levels included inflation and high energy prices that ate into disposable incomes, Sharma explained.

Segment Breakdown

Among the three main lubricant segments, industrial lubricant demand in the U.S. recovered the most last year, reaching 99% of the 2019 level. The consumer automotive lubricant segment recovered more slowly, to around 93% of its 2019 level, impacted by a mix of positive factors and negative trends in the market.

“The year 2021 in the U.S. saw increased vaccinations, people moving around more often, people taking business trips and as a result of which overall mobility in the country increased,” she said about some of the positive factors. In the U.S., gasoline consumption also recovered last year to about 95% of its pre-pandemic level.  Kline also found that the overall vehicle miles driven in the country recovered in 2021 to nearly 97-98% of its 2019 levels.

Among trends last year hindering U.S. consumer automotive lubricant demand were a decline in new vehicles registrations, which were 89% of 2019’sregistrations, and the impacts of supply chain issues and shortages in semiconductor procurement on overall vehicle manufacturing in the country.

“All of that also impacted the factory fill volumes in the region,” she said. “… the great penetration of synthetics in the U.S. market overall played its part in keeping the volumes down,” due to longer oil drain intervals.

Neighboring Markets

Lubricant demand in neighboring markets rebounded last year. In 2020, overall lubricant demand in Mexico dipped 24%, as the country’s gross domestic product fell by 20%. This steep recession impacted the manufacturing and construction industries. Mexico’s economy partially recovered in 2021.

Rising inflation and higher interest rates intended to combat the inflation, increases in global energy and commodity prices due to the Russia-Ukraine war, and supply chain bottlenecks kept last year’s lubricant market shy of 2019 levels.

Sharma noted the future in the mid- to long-term is brighter for Mexico as its economy is expected to grow. This means lubricant demand is expected to grow at the same time, driven by manufacturing. Gains in consumer confidence are expected to encourage sales of vehicles and expenditure on vehicles, Sharma added.

In Canada, demand bounced back in the first half of 2021, after declining more than 5% in 2020, she said, although demand remained below 2019. The uptick was likely due to all-time-high manufacturing sales in the country, which grew almost 18% during 2020. Nearly half of finished lubricant demand in Canada stems from the industrial segment.

The recovery stopped short of 2019 figures due to tightness of raw material supply for additives and base stocks.

The Kline source report for the presentation was “Opportunities in Lubricants: North America Market Analysis.”