Global bright stock demand was 2.7 million tons in 2017, but is expected to decline by approximately 250,000 tons by 2027, said Kline & Co. in a webinar last week. The United States and Canada account for 12 to 15 percent of demand, and their consumption is expected to decrease at an average annual rate of 0.5 to 0.7 percent, while South America plus Mexico account for 8 to 10 percent, with consumption predicted to increase at an annual rate of up to 0.3 percent.
Kline said it grouped Mexico with South America for the purposes of this study because Mexicos lubricant market bares more resemblance to South Americas market than the United States and Canadas.
Conventional API Group I bright stocks, which are made at Group I refineries, make up about 85 to 90 percent of [global] demand, with Group V, or naphthenic, bright stocks and alternate bright stocks, which include Group II and other processes that involves processing a naphthenic crude but producing a product that matches at least Group I quality, making up the remaining demand,” said Project Manager Anuj Kumar.
Kumar said that demand for Group V or alternate bright stocks is uncommon in most regions. Since North America produces Group V and alternative bright stocks, a small but growing market exists, he noted. Jackson, Mississippi-based Ergon produces both naphthenic and alternate bright stock in the United States.
The global bright stock market has a slight surplus, with supply of roughly 2.8 million tons. The oversupply stems primarily from a decreased demand for automotive engine oil products in developed countries using bright stocks.
While on the overall level the bright stock market appears to be balanced, there are regional supply-demand imbalances, said Kumar.
Bright stocks are underrepresented in the U.S. and Canada, with those countries making up about 15 percent of global bright stock demand despite accounting for nearly 25 percent of global finished lubricant demand. South America and America and Mexico hold roughly 12 percent of global bright stock demand but only 10 percent of global finished lubricant demand.
Currently, the U.S. and Canada are experiencing a nearly 200,000 ton per year surplus, while South America and Mexico are operating at deficit of about 50,000 t/y. The U.S. and Canada export their surplus to almost all developing regions, but primarily to Mexico and South America. The U.S. also exports to Africa and Asia-Pacific. As demand for bright stocks continues to shrink in the U.S. and Canada, Kumar suspects the region will take on a larger role in bright stock exports.
Bright stock in underrepresented in [the] North American market on account of low usage of high-viscosity engine oils (such as monogrades and SAE 20W-40 oils), which require higher quantities for bright stocks, Kumar noted. The demand for axle oil in North America has largely shifted towards 80W-90, which requires a lesser amount of bright stocks in formulation as compared to 85W-140, he continued.
In South America and Mexico, bright stocks are overrepresented because of the large demand for monograde and heavier multigrade automotive engine oils. These oils require a large amount of bright stocks, causing the higher demand.
In the global market bright stocks are underrepresented in automotive engine oils, but overrepresented in industrial and automotive gear oil applications, as well as marine oils and greases.
Although PCMOs make up approximately 22 percent of global finished lubricant demand, the product takes up a mere 5 percent of global bright stock demand. Automotive gear oils accounts for about 4 percent of global finished lubricant demand, but almost 20 percent of global bright stock demand.
The slower rate of finished lubricant demand growth and swift quality shifts in automotive engine oils worldwide will result in a net decline in demand for bright stocks, noted Kumar in his presentation. Although bright stock demand for automotive gear oils, greases and process oils is expected to increase, and bright stock demand for marine oils and industrial gear oils is predicted to remain the same, the demand decline in bright stocks for automotive engine oils is significant enough to cause overall demand to decrease.
Emphasis on [the] environment, along with fuel efficiency, has already impacted demand for monogrades and heavy multigrades in passenger cars and, to an extent, heavy-duty vehicles, especially in North America and Western Europe. This has impacted demand for bright stocks significantly. As this trend catches up in other regions, especially Africa and the Middle East, and South America, the demand for bright stock from automotive engine oils will decline, said Kumar in an interview.
Another major challenge to the bright stocks market is Group I plant closures. Between 1.3 million tons and 1.4 million tons of bright stock capacity has shut down across the globe since 1997. Over the past 20 years, bright stock supply has been an inevitable casualty of Group I rationalization due to technical changes in finished lubricant quality and burgeoning Group II/III supply, said Kumar. In North America nearly 450,000 tons of bright stock capacity has shut down since 1997, and about 30,000 tons of bright stock capacity has shut down in South America.
Because of growing Group II and Group III competition, Group I plants are being forced to operate at lower rates, hindering conventional Group I bright stock production, particularly in North America. Group I base oil demand took up 65 percent of global demand in 2007, but decreased to 39 percent of demand by 2017, according to the LubesNGreases Factbook.
In South America, unplanned shutdowns, crude issues and cash-flow problems have significantly impacted bright stock capacity.
Global bright stock supply is expected to decrease by 10 percent to approximately 2.4 million tons by 2027. The bright stocks market will see a net deficit of between 250,000 tons and 300,000 tons by then, forecasts Kline. This shortfall represents the combined effects of the curtailed demand for heavy and monograde engine oils, increase in demand for industrial oils and process oils, supply erosion resulting from Group I plant shutdowns/conversions and increased supply from Group V and alternate bright stock plants, said Kumar.
Other market dynamics will have to cover the gap, and Kline believes polyisobutylene are the alternative materials best suited to address the impending deficit. PIBs are a favorable in terms of availability, technical suitability and volume savings and are moderately suitable price wise. Kline also found high-viscosity polyalkylene glycol to be a moderately suitable alternative, with the product faring well in all categories but price.