Iconic Lubrificantes is a lubricant manufacturer in Brazil that represents the Chevron and Ipiranga brands. Iconic was also Brazil’s largest lubricant supplier in 2022. 

Brazil’s base oils and lubricant industry is growing, with several new projects in the pipeline and plans for upgrading existing facilities. Lubricant supply is handled by two main groups – a large number of lubricant suppliers that represent the nine major players, and a second group that are members of Simepetro, the Brazilian Association of Lubricant Producers and Importers, Brazil’s equivalent to the U.S.’ Independent Lubricant Manufacturers Association . According to Guimaraes, Simepetro represents many lubricant producers already serving global and international lube brands.

The Brazilian lubricant market share is not distributed very evenly, as 65% of lubricant volume is dominated by the main players – suppliers such as Iconic, Vibra, Moove, Petronas, Shell, Castrol, Total and a few others. The remaining 35% of market share is distributed among the rest of the players – local, international and global. Activities are primarily geared towards meeting the needs of the automotive industry, with passenger cars and motorcycles accounting for 27% of the market, followed by industrial applications at 24%, heavy duty diesel vehicles at 23%, driveline fluids at 22% and non-segmented applications at 4%.

Brazil has an extensive history of climate policies, precipitated in part because the country is a large greenhouse gas emitter as it cut down large portions of its rain forest for the production of timber and the expansion of agricultural land. “A standing forest absorbs carbon; cutting it down releases it,” explained an article published by the World Bank. In 2016, Brazil ratified the Paris Agreement and established its first Nationally Determined Contribution document, including targets for greenhouse gas emission reductions. In March 2022, Brazil updated its document, reaffirming its commitment to reduce its greenhouse gas emissions by 37% by the year 2025 and by 50% by the year 2030, compared to 2005 readings. Brazil’s commitments also include the lofty target of achieving climate neutrality by 2050.

The South American nation boasts a low-carbon energy mix, based on hydropower, wind energy and biofuels. Nearly 48% of its energy needs and about 83% of its electricity are generated from renewable sources, Guimaraes noted, adding that sustainability is not necessarily the main cause for electrification because Brazil already has a fairly sustainable fleet. At the moment, about 75% of the passenger car fleet is running on “flex” internal combustion engines (meaning that the owner of the car has the flexibility to run it on gasoline or ethanol), and there is still a low penetration of hybrid electric vehicles and battery electric vehicles.

Carbon dioxide emissions from ICE vehicles run on ethanol are lower than those from vehicles run on a battery. Electric cars may become more popular as they offer the latest technologies and comforts such as a smooth ride to the driver. The average age of vehicles in Brazil is also going down, so that new technologies used in these vehicles can help improve emission levels, but there is room for improvement, and this means that there are “opportunities for everybody,” according to Guimaraes.

He also underlined that the Brazilian National Agency for Petroleum, Natural Gas and Biofuels plays an important role in ensuring that there is user confidence in the quality of manufactured products and it therefore requires the registration of each product and its components. The agency is also responsible for establishing and monitoring used oil collection regulations. “The government, through ANP, adds value to the lubricant market by providing data transparency, setting high-quality standards, pushing for circularity, and assuring peace of mind to lubricant end-users,” Guimaraes noted. The Ministry of Environment also requires that almost half of all lubricants that a company produces be collected as used oil.

Logistics, alongside tax management, play a strategic role in the lubricant market, which substantially impact the balance of supply and demand as well as the location of production and distribution sites. Most of the population in Brazil – 45% — is concentrated near Rio de Janeiro and Sao Paulo, although the southern region also houses a large portion of the total population, 21%. The country’s center and north regions are less densely populated.

To serve the needs of a growing population, Brazil has promoted the sustained growth of agricultural activities, and supported a strong automotive industry. In 2023, automotive production was still below pre-pandemic levels, but it has gained pace. Vehicle production stood at 2.9 million units in 2019 and fell to 2.0 million in 2020 but is expected to reach 2.4 million units in 2023, Guimaraes observed. “Better buying behavior, credit access, and reduced unemployment has led to a newer and steadily growing fleet recovery after the pandemic,” he added.

Growing demand for premium automotive lubricants will likely bring about an increase in requirements for high-performance base oil grades. Brazil’s domestic base oil production centers mostly on Group I base oils, with a small percentage of production involving Group II cuts. Brazil currently imports significant volumes of Group I base oils, even larger volumes of Group II cuts, and to a lesser extent, Group III grades. The majority of base oil imports is consumed by the top five lubricant companies, Guimaraes explained.

According to estimates developed by Iconic, by the end of 2023, Brazil’s demand for Group I base oils will have grown by 0.6%, Group II by 6.3%, and Group III by 4.8%. From 2023 to 2028, Group I demand is expected to remain flat, Group II base oil consumption will grow fast, and Group II demand will be keeping pace.

In terms of the heavy-duty vehicle fleet, currently, some lubricant producers use Group I base oils to manufacture API CI-4 lubricants, but “when we move from CI-4 to CK-4, it means that Group II base oils will need to be used,” he noted.

Looking into the future of the base oils and lubricants industry in Brazil, Guimaraes projected that lubricant produced for ICE technology will last longer than the global average, while still achieving lower emissions, but that significant improvements lay ahead for automotive lubricants, affecting the country’s base oil portfolio.

“Base oils have the most to contribute to the upgrade of the Brazilian lubricant market,” he emphasized, adding that Brazil’s lubricant segment is resilient and has shown minor volume fluctuations over the past decade, offering “an open door for those who would like to diversify risks.”