India Remains Bright Spot for Lubes


India Remains Bright Spot for Lubes

MUMBAI, India – The global lubricants industry is passing through a phase of little to no growth, but India remains a bright spot due to its steadily growing demand that offers opportunities despite the markets complexities, industry insiders said at a conference here.

India is already the worlds third-largest finished lubricants market, and it holds great potential for marketers due to its fragmented nature, low barriers to entry and appetite for more players, said Sanjay Kumar, chief general manager of business development at state-ownedHindustan Petroleum Corp. Ltd.

Kline & Co. consultants estimates Indias annual lubricants demand to be 2.4 million metric tons and says it is growing at a compound annual rate of 2.5 percent, on track to reach 2.7 million tons by 2021.

Kumar added that India has more than 35 well-organized, established companies and over 500 regional players, but suppliers can still boost their growth prospects by opting for co-branding with original equipment manufacturers, increasing distribution channels and communicating with consumers through relevant brand strategy.

Theres a huge growth opportunity due to a rising numbers of both humans and vehicles in India, he told the All India Base Oil, Lubricant and Wax Conference, which was jointly organized by Rex Fuels and PetrosilGroup in February. Everybody is aspiring for a good and enhanced standard of living. That means more vehicles and more manufacturing activity, he added. Kumar said the country is urbanizing and that this will lead to more transportation activities, thereby boosting demand for lubricants.

In terms of volume, the Indian lubricants industry is likely to grow more than any other for at least for a decade, and that presents lots of opportunities for domestic as well as foreign players, he said. Kumar added that challenges that arose due to the countrys new Goods and Services tax regime and Indias plan to jump from the Bharat Stage IV automobile emissions standard directly to BS VI in 2020 also offers huge growth potential to the companies that redesign their supply chain management and launch their products before the implementation of BS VI standard in the country. BS VI is equivalent to the European Unions Euro 6 standard and is expected to require engine design changes that require more advanced engine oils.

Some other key opportunities available for suppliers are in large segments like low polycyclic aromatic hydrocarbons oils and transformer oils, as well as in marine lubes and rerefining of used oils, Kumar said. Multi-brand servicing, used oil aggregators, vehicle aggregators and packaging are some other areas with growth potential, he noted.

Kline & Co., which is based in the United States, calculates that the industrial segment accounts for 52 percent of Indias market, while commercial and consumer segments account for 31 percent and 17 percent, respectively.

The primary driver will be strong sales of two-wheelers and passenger cars, Anuj Kumar Singh, a project manager forKlines energy practice,told Lube Report Asia. A revival in the commercial and industrial segments will also add to the demand, but new demand creation from the consumer segment – motorcycle oilsand passenger car motor oils – will be faster than from the commercial and industrial segments, he added.

Photo: Joe Beeton / Lube Report

The Indian automobile industry – which includes passenger vehicles, commercial vehicles, three wheelers and two wheelers – produced 21.4 million vehicles in April-December 2017, up 11 percent from the same period last year, according to the latest data from the Society of Indian Automobile Manufacturers.

Industry officials said that Indias two-wheeler market – which include motorcycles, scooters and mopeds – has already surpassed Chinas and will continue growing as vehicle ownership rises. The two-wheeler segment accounts for about 80 percent of Indias automobile market.

Finished lubricants demand in India will primarily be driven by the consumer segment, Singh said. He predicted the consumer segment to grow at a compound annual rate of 6 percent and the commercial segment at a rate of 2 percent through 2021. The industrial and process oil segments are projected to grow at 1.6 percent and 1.7 percent, respectively.

India, however, will continue to rely on imports from South Korea, the United Arab Emirates, Singapore and other countries to meet its base oil requirements because the domestic supply is inadequate to meet the demand, industry officials stated. Ashish Navalkar, deputy general manager of supply chain at Gulf Oil Lubricants India Ltd. and GP Petroleums Ltd.CEO Hari Prakash Moothedath concurred.

Imports will keep on going, Navalkar said, adding that lower production of base stocks and relatively higher local prices are the companies key concerns. Moothedath said that unless the Indian refineries increase their output, imports will continue due to strong demand for base stocks, which are widely consumed outside lubricant applications in India.

Related Topics

Asia    Finished Lubricants    India    Region