Insiders Upbeat on Indian Lubes


MUMBAI – The heady growth of recent years may be gone for now, but players throughout Indias lubricant market remain upbeat about its prospects. Speakers at a conference here last week said the market is well-stocked with base stocks, is improving in quality and can cope with problems such as potential shortages of bright stock.

India is the worlds third-largest lubricant market, thanks in part to several years of demand growth rates in the high single digits. That pace slackened the past couple years, and demand actually fell last year, according to some analysts. There seems to be consensus that growth will remain modest for the foreseeable future.

In general, lubricant companies also benefit when quality rises because higher quality products usually bring higher prices and bigger profit margins. That is indeed happening at the moment, according to four industry insiders who participated in a roundtable discussion Wednesday at the ICIS Indian Base Oils & Lubricants Conference.

The Indian market is now in a very good position to upgrade, and it is upgrading – possibly more rapidly than some more developed markets, Afton Chemicals Harshad Jambaulikar said.

Other roundtable speakers agreed and said the improvements are showing up in a variety of ways. Engine oils, for example, are providing better protection and lasting longer.

This country used to have very short drain intervals. But now they are closer to [those in] Europe, said Y.P. Rao, vice president for global technology at lubricant marketer Gulf Oil International. He added that the improvements are due in part to availability of high-quality base stocks at attractive prices.

Quite a few companies are making use of [API Group] II, II-plus and III for product differentiation. I think there is likely to be more of that in the future.

Moderators asked the panel whether they expect lube marketers in India to move mostly to Group II, as have blenders in the United States, or to imitate European companies by using blends of Group I and III. Panelists said India will probably take a middle path because it has ample access to domestic and imported Group II and it sits between two Group III production hubs – the Pacific Rim and the Middle East.

We have the advantage of using both models, Jambaulikar said. We can pick and choose whats good for the country, whats good for the market.

Heavy-duty diesel engine oils constitute the second-largest segment of Indias lubricant market, after process oils. Moderators asked if panelists expect heavy-duty diesel oils in India to shift toward 5W-30 or 5W-40 viscosity grades – a change that appears to be underway in Japan and Europe. Panelists predicted the Indian market will shift to 10W grades (15Ws currently dominate), but not to 5Ws.

All of these of these new OEMs are shifting over to 10Ws, Indian Oil Corp.s S Nandakumar said, referring to foreign truck makers entering India. Its possible that we will move to 10W over the next 10 years.

Around the world, observers say bright stock availability has tightened the past decade or two as numerous Group I base oil plants have closed. To date Group I plants have been nearly the only source of bright stock because operators of Group II plants have not found it commercially viable to make it and Group III plants cannot. Some lubricant blenders say there are now shortages of bright stock, and they have sought replacements.

Daniel Iannuzzi, of base oil trader Feedco, said there will be more closings of Group I plants now making bright stock, meaning that availability will continue to decline. But he added that several other mitigating factors will keep serious shortages from developing. Formulators do have alternatives, such as heavy naphthenic base stocks and polyisobutenes, even if they cost more than bright stock.

Also, some base oil producers may increase their output of bright stock, either through capital improvements or by operational changes. Finally, Iannuzzi said, refiners will have greater incentive to take such steps if bright stock supply tightens further, causing prices to rise.

Rao suggested that a dichotomy may develop between base oil plants, with Group I facilities maximizing output of bright stock and other heavy base oils while Group II and III plants focus on lighter grades. My thinking is that there is nothing to worry about regarding bright stock, he said.

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