Growth, Consolidation Forecast for Vietnam


SINGAPORE – A young and literate workforce coupled with market liberalization should help Vietnams lubricant market to continue growing at a healthy clip, but supplier consolidation is also expected, an industry insider said during a seminar ahead of the ICIS Asian Base Oils & Lubricants Conference here earlier this month.

Thanks to steps toward market liberalization – such as allowing 100 percent ownership of businesses and the ASEAN (Association of Southeast Asian Nations) Economic Communitys elimination of import tariffs by the end of the year – foreign investment is growing and vehicle sales are rising at a white hot rate, AP Oil International Ltd. Chairman and Managing Director Ho Leng Woon said. Vietnams car population has grown by 10 percent to 20 percent per year in recent years, he explained, while its motorcycle population – which is the fourth-largest in the world – is swelling at a 10 percent rate.

According to the Government Statistics Board of Vietnam, the number of cars on Vietnams roads increased from 2.4 million in 2014 to 2.6 million in 2015 while the population of motorcycles increased from 41.2 million in 2014 to 43.5 million in 2015. The country now has 60 million people between the ages of 20 and 50, which implies huge potential for economic growth. The Asian Development Bank forecast that Vietnams gross domestic product will increase 6.7 percent this year, equal to the rate that it grew in 2015. GDP for the other 10 countries making up the ASEAN Economic Community is forecast to grow an average of 4.5 percent in 2016.

Photo: Tyler Ingram / Flickr

The middle income group [in Vietnam] is expanding, and most are embracing a modern lifestyle with the willingness to spend, Ho commented.

He estimates that annual lubricant sales in 2015 increased by 1.8 percent to 377,000 metric tons.

About 70 percent to 80 percent of lubricants are blended locally, Ho said. There is still the cost advantage of having a plant in Vietnam, and AP Oil has its own private jetty and terminal. Hos company operates through its subsidiary, AP Saigon Petro JSC in Vietnam.

Vietnam has about 20 blending plants, but only 10 of them have capacity to make more than 15,000 metric tons per year, and the majority of those are owned by foreign oil majors or joint ventures. The exceptions are two plants involving state-owned Petrolimex and local blender, Mekong Lube. The biggest plant is a 50,000 t/y facility operated by BP/Castrol, followed by JX Nippon Oil & Energys 40,000 t/y plant and AP Saigons with 30,000 t/y plant.

With most large international oil majors already selling lubricants in Vietnam, Ho warned of increasing competition. Although there has been no closing of lubricant companies for the past five years, those who are not doing well will have to close down. We have to prepare for that. We want to go into Laos, Cambodia and expand our market with higher growth.

Motorcycle oils account for 35 percent of total lubricant demand in the country and diesel engine oil makes up 33 percent, followed by industrial lubricants with 19 percent and passenger car motor oil at 6 percent. There are more than 50 brands of lubricants in Vietnam with Castrol having the largest market share of 22 percent. Petrolimex has 12 percent, Shell 9 percent and Total 6 percent.

The nation imported approximately 290,000 tons of base oil in 2015, an increase of 8.6 percent compared to the previous year. Oil majors and joint ventures use significant amounts of API Group II and Group III base oils, and some local blenders and state-owned companies use Group II, too. Local blenders use Group I and recycled oils.

In 2008 AP Oil International collaborated with Saigon Petro, a state-owned oil company in Vietnam, to form a joint venture, AP Saigon Petro Joint Stock Co., and acquired a former Castrol plant in Ho Chi Minh City. The plant has an oil terminal and a private jetty with berthing vessels capacity of 25,000 t/y and a Research and Development laboratory.

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