Gosh, a project leader for the market research firms Energy Practice, clarified that general industrial oils covers large-volume products such as hydraulic fluids, industrial gear oils, turbine and circulating fluids, compressor and refrigeration fluids, and other industrial products such as heat transfer fluids. (It does not include process oils, industrial engine oils, metalworking fluids or greases.)

Worldwide, she added, this category accounts for about 17 percent of total lubricant demand. Hydraulic fluids alone account for more than half of this segment, turbine and circulating oils contribute another 15 percent, and compressor and refrigeration oils make up about 12 percent.

In 2005, Asia-Pacific had but a 30 percent share of the global industrial oils and fluids market, but it now accounts for more than 40 percent of the total, pointed out Gosh. This spike in demand is mainly due to the regions power generation, chemicals, machinery, transportation equipment and mining industries.

By contrast, Europes and North Americas markets have shrunk in size, not only because of the manufacturing shift to Asia, but also due to these regions increased use of long-drain lubricants, which of course is cutting into volumes sold, Gosh said.

In fact, with 17 percent of the overall market, the power generation industry is the largest end user of industrial oils, Gosh emphasized, and accounts for more than 50 percent of the compressor and refrigeration oils and turbine and circulating oils used globally.

Gosh also discussed the market share of synthetic industrial lubricants, which by Klines definition includes synthetic, semisynthetic, fire-resistant and biodegradable products – that is, just about anything other than conventional mineral oils.

Klines study, General Industrial Oils and Fluids 2012: Global Market Analysis and Opportunities, concluded that synthetics account for just 9 percent of general industrial oil demand worldwide, but there are wide variances among regions and products. If you look at hydraulic fluid, the majority is mineral oil based, but there is increasing acceptance of API Group II and higher viscosity index products. Of the synthetic hydraulic fluids, water glycols have the highest share of the synthetics market. Also, refrigeration oils have the highest percentage overall of synthetics use, around 20 percent, due to international protocols prohibiting the use of chlorofluorocarbons.

Industrial lubricants are a very, very fragmented market, and the top five suppliers of general industrial oils together can claim just 45 percent of the global market. Here too, there are regional differences, Gosh emphasized. The top five suppliers hold half the market in Europe, perhaps 48 percent in Asia-Pacific, and around 43 percent in North America. But in the rest of the world, they command less than a 30 percent market share, leaving plenty of room for competitors to maneuver.

On a global basis, Shell and ExxonMobil are the two leading suppliers of general industrial oils. The worlds top 10 also includes three national oil companies that share 14 percent of demand, Kline indicates. And competition among these heavyweights is becoming more intense.

We are seeing an increasing presence and share of national oil companies in the industrial oils market, Gosh observed. Earlier, the national oil companies focus was not on high-performance products, synthetics and semi-synthetic lubricants. But what we have seen lately is that with improvements in their research and development capabilities and in their production capabilities, there is an increasing number of national oil companies that are venturing into synthetic and semi-synthetic lubricants for industry.

We also see national oil companies replacing global majors in selling industrial oils in some markets, such as machinery lubricants as well as mining lubricants.

While Gosh did not single out any national oil company by name, some of the most sizable in Asia-Pacific are PetroChina and Sinopec, Malaysias Petronas, Indian Oil Corp., and Pertamina in Indonesia. All have expressed ambitions beyond their borders, and have been working to build lubricants sales in adjacent or even distant countries.

Beyond the hopes of its national oil companies, Asia-Pacifics fortunes will track the rise of its automobile and other manufacturing industries, like metals, mining and construction, Gosh said. The key demand drivers in Asia-Pacific are its growing population, growing economies and emerging consumer middle class, all of which is fueling demand for electricity. Also, governments in the region have become very aggressive in their modernization and electrification plans.

Also, we at Kline are seeing increased sensitivity to issues such as safety and equipment performance in industry, so that will drive growth in demand for synthetic lubricants, Gosh continued. The issue of how better lubricants can boost equipment performance may at first be driven by OEM specifications, but it also comes from increased awareness created by lubricant suppliers, she added.

Keeping these drivers in mind, general industrial oils demand is projected to grow to 7,200 kilotons by 2016. Where is this growth coming from? In Asia-Pacific, the growth will be close to 3 percent per annum, while the rest of the world will be a bit over 2 percent per annum.

In terms of product categories, compressor and refrigeration oils are seen growing fastest – almost 3 percent annually – while all others push ahead about 2 percent a year. In closing, Gosh reminded that in the industrial oils markets of Asia-Pacific, price is a very important factor, but not the only point. There are customers who want improved product quality, who want customized solutions, who want technical services from their supplier. All of these offer opportunities to lubricant suppliers to boost their volumes and their profitability.

Lube Report Asia will occasionally include articles originally published in sister publications of LNG Publishing Co. This article appeared in the June 2013 issue of LubesnGreases – Volume 19, Issue 6 – under the headline, Asia: Hot Spot for Industrial Oils.