The Asia-Pacific region will shift to lighter viscosity grade engine oils faster than the North American market did in the 1990s, partly due to a faster growing and younger car parc and greater availability of API Group II and III base oils, according to industry insiders.
Historically, other regions have typically taken many years to adopt new viscosity grades. Markets usually have inertia against that kind of change for a combination of reasons, from the types of base stocks being supplied to the fact that lube blenders have limited storage tank space for new base stocks that may be needed to enable cost effective production of new viscosity grades of finished lubes. In Asia-Pacific, however, industry observers believe conditions are aligned for a faster shift to lighter viscosity grades of engine oils. In a recent interview, George Morvey, industry manager for Kline & Co.s energy practice, said the firm expects SAE 5W-20 and 5W-30 to represent 31 percent of passenger car motor oil demand by 2026, up from 18 percent in 2016. The consulting firm forecasts and even faster uptake for SAE 0W-XX type products, which it believes will grow from 10 percent to 29 percent by 2026. SAE 5W-40 and -50 will also see moderate growth while all heavier grades will decline, the firm predicts.
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A traffic jam in Bangkok. The Asia-Pacific region is transitioning to lighter viscosity oils at a faster rate than North America did in the 1990s.
At the same time, Morvey said, SAE 10W-30 and-40, which represented 34 percent of PCMO sold in this region in 2016, will shrink to around 18 percent in 2026. Of course, the Asia-Pacific region represents many diverse economies, but China will drive the overall trends. In China, SAE 5W-20 and 30 represented about 17 percent of the market in 2016 and will see significant growth by 2026 to around 37 percent of the market.
The most remarkable change will be for SAE 0W-XX grades, which only had a 7 percent share in 2016 and are expected to grow to an industry leading 38 percent of all PCMO oil sold in China by 2026, while SAE10W-30 and 10W-40 grades will shrink from 44 percent to 13 percent of the market in that time frame. Kline also predicts that monogrades stake of Chinas passenger car market will shrink to almost zero in this time frame.
It appears that Asia-Pacific – specifically China – is adapting to the latest OEM viscosity grade recommendations at a faster pace than North America did. Those markets had some significant differences. The North American car parc was growing when OEMs began recommending 5W-30 in the early 1990s, but not as fast as Asia-Pacifics is today.
According to Infineum data, by the turn of the century SAE 5W-30 only represented 19 percent of the engine oil sold in North America, and 10W-30 still represented over 50 percent. The practicality of ramping up production of 5W-30 oils at that time may have been affected by the mix of available base stocks, which was then much more skewed toward Group I oils. Only in the 1990s did refiners begin making large volumes of Group II – beginning at Chevrons plant in Richmond, California, and Suns facility in Yabucoa, Puerto Rico. Group II plants produce higher proportions of low-viscosity base stocks. Perhaps more importantly, though, many low-viscosity Group I oils do not meet the volatility requirements for 5W-30 engine oils. That may have contributed to a 5W-30 supply and price scenario that encouraged many auto service providers to stick with 10W-30 and resist movement to the newer, more fuel-efficient viscosity grade.
As supply of Group II and Group III grew, North America shifted more to lighter engine oils, and today SAE 5W-20 and -30 represent about 70 percent of the market. SAE 0W-20 is rapidly growing as OEMs take advantage of the latest viscosity grades to improve fuel economy. According to Kline estimates, by 2026 SAE 5W-20/30 will represent about 55 of the North American market, with SAE 0W-20 representing 35 percent of the market. All other grades will diminish and become small niche products in North America by 2026.
This indicates that China will have the largest demand for SAE 0W-20 products by 2026. China and Asia-Pacific will have a lower share of 5W-20 and-30 oils, but that can be explained by the age of the car parc and rapid growth of the market, with North America having more legacy vehicles on the road. Joe Rousmaniere, director of business development at Chemlube International, said,Its no surprise that China is rapidly changing.As is the case in many other industries and technologies, growth happens faster and larger in China than anywhere else. What takes decades to develop in the West takes years in China.China is also mandating improved fuel economy, which will drive the move to the lighter viscosity grades.
Y. P. Rao of Gulf Oil International added that SAE 0W-20 will have significant demand by 2021, and XW-30 products will also be very important grades in the region. I expect China and the rest of Asia-Pacific will move at a faster pace to adopt new viscosity grades and higher quality oils.
OEM recommendations – which continue to evolve – will play a key role in determining the viscosity grades of oils that marketers and service providers supply, but the availability of large volumes of Group II and III oils will make it easier to move downward on the viscosity continuum. As demand for 0W multigrades increases, availability of Group III+ and polyalphaolefin base stocks may also come into play. Finally, lubricant marketers need to closely manage proliferation of engine oil grades because of logistical issues.