Thanks to a slowdown in the nations economic growth, lubricant demand in China was flat in 2014 at 7.6 million metric tons, an official from Sinopec Lubricants told an industry conference in Shanghai recently. The state-owned oil giant, which included greases in its calculations, predicted a 2.1 percent increase this year.
For years China was one of the fastest-growing lubricant markets, mostly because of sustained double-digit growth by its overall economy. Now economic growth has dropped below 10 percent, and government officials say it should stay there as the nation shifts from a developing economy focused on investment and manufacturing to a more mature economy that leans more heavily on consumption.
The Chinese economy stepped into an intermediate speed of growth that will be the new normal, Sinopec Lubricants Base Oil Manager Zeng Haiying told the Enmore China Lubricants Focus conference in Shanghai in April. She cited predictions that the nations economy will grow 7 percent this year and said it is expected to maintain that rate in coming years.
Zeng observed that Sinopec and another state-owned oil giant, PetroChina, no longer dominate Chinas base oil market. Between 2000 and 2014, their share of domestic supply fell from 65 percent to 33 percent. Over the same time span, volumes from imports and other domestic producers have both risen steadily. In 2014, the total imported base oil volume was 2.7 million tons, up 15.6 percent year-to-year, Zeng said. The total imported base oil volume in 2014 exceeded the aggregate production of Sinopec and PetroChina.
The attractiveness of imports has been boosted, she added, by reductions in taxes assessed on shipments from key areas. China and South Korea recently signed a trade pact that will reduce duties charged to Chinese imports of South Korean products such as base oils. China has also been negotiating free trade agreements eliminating duties on imports from Southeast Asian nations such as Malaysia, Thailand and Indonesia.
The profile of the domestic base oil market has also shifted from API Group I to Group II and III stocks, and Zeng said that trend should continue. By 2020, she predicted, Group II will be the markets largest base oil category, accounting for 38 percent of demand. Group I will account for 33 percent, she said, followed by Group III, with 19 percent, and naphthenics, which will claim 10 percent. Sinopec expects demand for bio-based base stocks will also grow, though from a modest level, and that the amount of rerefining in the country will grow to recycle more than 30 percent of the nations used lubricants.
Thanks to expanding automobile ownership, Chinas finished lubricant market has been shifting toward automotive lubricants, and Zeng said that trend will also continue. In 2014, the country consumed 3.9 million tons of automotive lubricants, compared to 3.3 million tons of industrial lubes, for a split of 54 percent to 46 percent. Within a few years, Zeng said, the automotive segments share will increase to 60 percent.
Heavy-duty diesel engine oils are the largest category within the automotive segment, with demand of 1.85 million tons accounting for 47 percent. The nation consumed 920,000 tons of gasoline engine oils in 2014, 350,000 tons of vehicle gear oils, 400,000 tons of marine oils and 250,000 tons of motorcycle oils.