Group II/III Glut, Group I Gap

Overall, Asia-Pacifics base stock supply and demand are balanced, but the region exports large volumes of surplus API Group III oils, and it uses excess Group II to fill a supply gap of Group I.

Those conclusions were shared last week during a webinar by Kline & Co. consultancy, which also noted that Group I oils are still being used in automotive lubricant formulations for Asia-Pacific markets.

The Asia-Pacific market was tightly balanced on an overall basis, Anuj Kumar, a project manager in Klines energy practice, said during the Oct. 8 event about the global lubricants base stocks market. However, the situation differed for each API Group. Group II and III base stocks are produced in excess in the Asia-Pacific region. Of this surplus, Group III is exported to North America and European markets, whereas Group II remains mostly in the region, targeted at Group I substitution.

That substitution partially bridgedthe Group I deficit in the Asia-Pacific region, along with Group I imports from other regions like Europe and the Middle East.

While Group I base oil is generally no longer used in automotive formulations in regions such as North America and Western Europe, it remains in use in Asia-Pacific and other regions. Group I is a key base stock used to formulate automotive lubricants in markets like Asia-Pacific, South America, Eastern Europe, Africa and the Middle East, Kumar said.

Klines study focused on Group I, II, III, gas-to-liquids and naphthenic base stocks. Not surprisingly, the firm said that base oil demand is closely tied to finished lubricants consumption.

The consultancy estimated global lubricant demand for finished lubricants reached 39.2 million metric tons in 2013, 1 percent higher than in 2012. Asia-Pacific had the largest block of lubricant demand, followed by North America and Europe. From a historical demand growth perspective, the share of Asia-Pacific in the global finished lubricant demand has grown considerably from 29 percent in 2004 to 43 percent in 2013, he said.

Lubricants used in automobiles represented more than half of the global finished lubricants market, Kumar said. Global automotive production - cars and commercial vehicles - reached a new high in 2012 at 84 million, and grew to 87 million units in 2013, according to the International Organization of Motor Vehicle Manufacturers. Kumar noted that sales growth in China and the United States, the worlds two largest auto markets, has led the new surge in car and truck manufacturing.