Malaysias Petronas Lubricants International opened an office in Sydney in April and unveiled its strategy to find a distributor and grow its business in Australias healthy and affluent economy.
Its not the only Asian-based lubricants supplier looking to capitalize on structural changes in the Australian market and expand in one of the Asian regions best opportunities to fetch higher margins.
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The Australian lubricant market has been ranked among the top 20 lubricant markets in the world, and it is characterized as one where high quality lubricants are demanded to service modern equipment.
Its clearly the dawn of the distributor, said Tim Seeber, partner in Western Australia-based International Lubricant Distributors, set up seven years ago to distribute lubricants supplied to Australia by Chinas Sinopec. He alluded to the fact that Australias last base oil plant closed in 2012. With base oil production in Australia, the local manufacturers had the power. Now, with refineries shut down, the importers have the advantage over local manufacturers.
The biggest change over the seven years is seeing how competitive the importers are, he added, talking about the changing landscape since forming ILD on the back of a contract with Sinopec in 2009.
Indonesias PT Pertamina and Singapores Performance Oil are among other Asia-based lubricant suppliers active in Australia.
Over the last two decades, the Australian and New Zealand economies have demonstrated strong resilience and are expected to remain robust into the future, said Giuseppe DArrigo, managing director of Petronas Lubricants International, commenting on what motivated the companys expansion in Australia.
The latest government data showed the Australian economy expanded at its fastest pace since 2012. The key measure, gross domestic product, grew 3.1 percent in the year ended March 31. It is almost 25 years since Australia experienced a recession, the second longest period of growth recorded among advanced economies worldwide. The Australian Government in its May budget forecast stronger growth of 3.25 percent for the year ending June 30, 2017.
Other drawcards were noted by Pertamina when launching their products in 2009: The Australian market is very attractive for Pertamina, distance is close as a neighbouring country, and it needs approximately 550,000 kiloliters per annum.
Market research group IBISWorld has estimated sales of lubricants and greases in Australia at about AU $1.7 billion (U.S. $1.3 billion) in the year ended last June 30. It showed the market is dominated by global brands, Caltex, BP, Valvoline, Shell and Fuchs.
We tend to be fighting it out in the Australian market with the big multinationals, said ILDs Seeber, adding that its sales of Sinopec lubricants had grown to more than U.S. $20 million a year.
Me and my partner [Mark Berkovic] both came out of BP Castrol. We formed ILD with the Sinopec distribution to take on the business-to-business sector and deal with the largest lubricant users in mining, transport and power generation and weve built our offer on a price-effective alternative, Seeber said.
Seeber said his companys approach was different to the traditional new entrant, which tends to go for the automotive sector. The mining sector in Australia has over the past decade gone through a major expansion and is now producing more than ever. In fact, mining was the largest contributor to growth over the past year, adding 0.9 percentage points to the headline 3.1 percent increase in gross domestic product.
Another part of the strategy has been to play down the origin of Sinopecs products.
One thing we told them was that it was important to remove anything from the label that would indicate this was a Chinese product, Seeber said. Chinese products do not have a good reputation in this market.
Petronas followed the very strategy that ILD avoided – targeting the automobile segment as it attempts to build market share. The Malaysian company started selling into Australia in 2002 through a third-party license with CNH International, maker of New Holland, Case, Iveco and International Harvester heavy equipment. Petronas developed and produced its AmbrA and AkcelA products in collaboration with CNH for use in its construction and agricultural equipment distributed around the world.
Given our future plans to introduce flagship lubricants products for the passenger car motor oil and commercial vehicle lubricants segments, we are actively looking for suitable partners to distribute Petronas lubricants portfolio in Australia and New Zealand, dArrigo said.
He added that passenger car motor oils should remain the largest segment of Australias lube market. Petronas aims to tap into the mining and industrial sectors in Australia and New Zealand in its bid to grow its revenue more than 30 percent over the next five years, dArrigo said. He said the companys goal was to capture 4 percent of the Australian and New Zealand market by 2021.