The lubricants market in Southeast Asia – which is weighted toward products for two-wheelers and process oils – will shrink this year but rebound to steadily swell over the next decade as the region’s economies continue to develop, a consultancy forecasts.
During an Oct. 21 webinar, Sushmita Dutta, a project manager with Kline & Co.’s energy practice, estimated that lube demand in the Association of Southeast Asian Nations will fall by 7% to 17% this year. The firm estimates that the region – which covers Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, Vietnam, Singapore and Brunei – consumed between 3.1 and 3.2 million metric tons of lubes in 2019.
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Dutta said the Asean nations’ economies would recover in the next few years, despite the COVID-19 pandemic’s impacts, with “industrialization and urbanization picking up momentum.”
Indonesia, which has the region’s largest economy, also has the largest vehicle parc, followed by Vietnam and Thailand. This partly explains why Indonesia has the highest lubricants demand, she said, accounting for about one-third of the region’s total. Thailand follows with a share of slightly more than one-fifth of that total, and Singapore is third, mainly due to its well-established marine industry, Dutta explained.
Automotive lubricant demand represents by far the largest segment of the regional market. Malaysia has a higher population of cars and a large industrial sector, while Thailand is the largest automotive manufacturing country in the region, and is therefore known as the “Detroit of Asia,” Dutta noted. A significant portion of Thailand’s car production is exported.
Singapore is an important trading hub and as a result, its marine oil consumption is much higher than that of the other nations.
In most of the region, the population of two-wheelers is more than that of passenger cars as two-wheelers are more affordable and easier to drive. Commercial vehicles are the third-largest part of the vehicle parc, which totals approximately 250 million-300 million units.
Indonesia has one of the largest two-wheelers markets, and Vietnam also has a very high number of these machines. Vietnam shows growing consumption of industrial lubricants, especially compared to Malaysia or the Philippines.
Most of the region’s demand for commercial lubricants – which totals approximately 700,000 to 800,000 tons – is from the trucking and logistics segment, followed by the transportation sector, and lubricants for agriculture, construction and mining, Dutta said.
Within the commercial automotive segment, monograde lubricants account for almost 50% of the market. Among multigrades, 15W-40 is the most popular, accounting for about one-third of heavy-duty motor oil demand. Other multigrades used are 20W-40, 20W-50, 10W-30 and 10W-40. The use of multigrades is growing, especially because original equipment manufacturers recommend multigrades for newer models.
“The Asean region is not as industrialized as western countries,” Dutta noted. “Therefore, automotive lubricants account for a larger share.” Although demand for multigrades is much higher in the passenger car motor oil segment than in the commercial segment, “monogrades have a significant share in countries like Indonesia, Cambodia, Myanmar and Laos.”
In the passenger car motor oil market, synthetics are used for high-end passenger cars, but it represents the smallest share within that segment. Commercial vehicle owners are more price sensitive because of the more frequent oil changes, she noted, and they do not see the need to buy an expensive oil because they cannot take full advantage of its properties.
Within the industrial lubricants segment, rubber and plastics process oil is the main application in this region, because many countries are tire manufacturers and exporters. The main process oil users are Indonesia, Malaysia and Thailand, with Indonesia coming in as the largest tire producer and exporter.
The second-largest industrial lubricant segment is the transportation sector, which includes the marine, railroad and aviation segments. Marine is the largest of those, particularly in Indonesia, Thailand and The Philippines. The third-largest consumer of lubricants is the manufacturing segment, which includes power generation, the auto industry, machinery, equipment and goods manufacturing.
Among the main lubricant suppliers, Shell has the largest share in the region. “Shell has the leading position due to its presence in most Asean countries, while Indonesia-based Pertamina comes in second because of its leading position in Indonesia, which is the largest lubricant consumer,” Dutta elaborated.
Multinational companies, such as Shell, BP, Total, Chevron and ExxonMobil, collectively account for approximately 40% of the market. Honda and Yamaha also play an important part in terms of motorcycle oils. “But the market is very diverse and competitive, and there are also many domestic and specialty oil suppliers aside from multi-national companies,” she said.
Dutta also said that all countries in the Asean region are migrating toward better quality oils and are implementing regulations to stop the use of counterfeit lubricants.