Asia-Pacifics Evolving Lube Demand

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Global lubricant demand is expected to increase at a compound annual rate of less than 1 percent, to 41 million metric tons by 2021, according to consultancy Kline & Co., with new vehicle sales and changing vehicle parcs driving passenger car motor oil demand in several Asian countries.

Kline estimated global finished lubricant demand at 39.6 million metric tons in 2016, including process and marine oils. Asia-Pacific had the most demand, followed by North America and Europe. Passenger car motor oil and two-stroke and four-stroke oils – which includes motorcycle oils, lawn and gardening machine oils, light duty marine lubes, personal watercraft oils and other types of products – took the position as leading application type for the first time, ahead of heavy duty motor oils and then process oils.

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George Morvey, industry manager for Klines Energy Practice, noted during an Aug. 31 webinar that in countries such as India, Indonesia and Thailand, new vehicle sales in the consumer and commercial space are positive and forecasted to show continued growth. New vehicle sales mean modern products and lower viscosity grades, so thats a good thing, he said.

A continued shift in vehicle preferences in some countries in the region is also promising. In India, for example, theyre seeing an evolving vehicle parc, Morvey noted. People are moving from two- to four-wheelers, which is a good sign, so that [shifts] demand from motorcycle oils to passenger car motor oils.

Among the top 13 country markets in terms of lubricant demand, China trailed closely behind the United States. India placed third; Japan fifth; South Korea eighth; Indonesia 9th; and Thailand 13th.

Kline estimated mixed lubricant demand growth rates for China to 2021, with more than 4 percent CAGR forecast for the consumer automotive segment, a decline of about 1 percent CAGR for the commercial automotive segment, and no change projected for the industrial segment.

India is projected to have the highest growth, with around 9 percent CAGR to 2021 for all three segments combined, including around 6 percent CAGR in the consumer segment.

Among other Asia-Pacific countries growth rates to 2021, Kline projects a total decline of close to 4 percent CAGR for Japan, with the bulk of that decline in the commercial and industrial segments. Across all three lube segments, South Korea is expected to have a total CAGR of less than 2 percent over that time. Stronger growth is projected in Indonesia, at close to 6 percent CAGR; and Thailand, at more than 4 percent.

More access to better base stocks is proving a factor in all types of country markets. What were seeing is whether looking at a developed or developing country market, the demand for high performance, low vis PCMO continues to accelerate, he said. Whats driving that? We are seeing continued expansion and availability of higher quality base stocks, from Group II to Group III+. That just makes it easier for formulators and supplies anywhere to access quality base stocks and improve their product slate.

Original equipment manufacturer technical demands and evolving government regulations remain key factors. That is a significant driver in a shift to lower viscosity grades, especially to synthetics, Morvey said. Government industry specifications – for improved fuel economy and reduced emissions has a big impact on the industry.

Kline estimated synthetic lubricants penetration at about 20 percent of the total global market in 2016, driven by expanding OEM technical demand. More and more OEMs, especially on the consumer passenger vehicle side, are moving to lower viscosity grades – 0Ws – for factory and service fill, he said. Suppliers are certainly doing their part in terms of marketing and promotional efforts to get product into the market and into those engines.

Regionally, Europe and North America are the two regions that are driving synthetic penetration, followed by Asia-Pacific. Despite low or no volumetric growth, regionally or globally, we continue to believe synthetics offer industry participants opportunities for revenue growth whether youre a formulator, an additive supplier or base stock manufacturer, Morvey said. The message here is that synthetics – full or semi-synthetics – is where you want to be globally, regionally and at the country level.

In Asia-Pacific, Kline projects around 7 percent CAGR from 2016 to 2021 for synthetic lubricants, and around 5 percent such growth for semi-synthetics, while conventional is expected to decline almost 1 percent CAGR during that time. This particular projection excludes process oils.

Movey also touched on key emerging trends and market conditions impacting lubricants demand. He said one key to watch for is the use of government initiatives to encourage local lubricants sourcing, which he noted is evident in countries such as China, Russia and India, with its Made in India program.

Online retailing of consumer lubricants is another emerging trend, he said, most visible in China with established outlets such as JD.com and Alibababa, with lube supplier participation.

Kline estimated the top 20 global finished lubricants suppliers for 2016, which accounted for about 61 percent of total lubricants supply. Shell remained in the lead for the 11th consecutive year, followed by ExxonMobil, BP, Chevron and Total. The Top 20 list included nine Asia-Pacific companies: Sinopec (6th overall), PetroChina (7th), Idemitsu (8th), JX Holdings (10th), Gulf Oil International (12th), Petronas (13th), Pertamina (14th), Indian Oil (17th), and Hindustan Petroleum (19th).

The study, released in August, is titled Global Lubricants: Market Analysis and Assessment.

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