India Lube Demand Grows

Indias lubricant demand grew around 2 percent in 2018, according to most of several industry observers interviewed by Lube Report about performance of the worlds third-largest lube market.

Sources agreed that last years growth was powered by automobile sales and the national governments promotion of infrastructure projects and that those same factors should help the market continue growing in the foreseeable future.

India consumes more lubricants than every country except the United States and China. It is also growing faster than most lube markets, making it of significant and growing interest to suppliers. Quality levels have long been low but are rising now, increasing opportunity for profits as well as sales.

Lube Report interviewed several industry analysts and insiders about the markets development in calendar year 2018. Kline & Co. consultants said demand for finished lubes, including process oils, rose between 2 and 2.5 percent to nearly 2.5 million metric tons. Gulf Oil International estimated that the market grew nearly 3 percent to 2.5 million tons. Shell pegged demand at 2.6 million tons and said it grew 2.4 percent in 2018, according to a December article by Moneycontrol, an Indian news and financial services group, although the oil company declined to comment for this article.

Chemical distributor Brenntag Ingredients India Pvt. didnt offer an opinion of how much demand grew last year but sized the market at 2.6 million tons per year. Rosefield DAA International, a Mumbai-based consulting firm, said the market grew 4 percent to 2.8 million tons.

Sources agreed that last years growth was powered by a jump in auto sales and strong activity in infrastructure development, along with the ongoing effects of rising income levels.Domestic auto sales, including passenger and commercial vehicles and two- and three-wheelers, rose 12.7 percent to 26.8 million units in 2018, and exports surged 20 percent to 4.6 million units, according to the Society of Indian Automobile Manufacturers. Two-wheelers sales rose 12.8 percent to 21.6 million units.Commercial vehicles sales jumped 27 percent to pass 1 million units for the first time, while three-wheelers and passenger vehicles sales increased 32 percent and 5 percent, respectively.

Rosefield Managing Partner Shailendra Gokhale called those large increases and predicted they will cause lube demand to rise significantly in coming years. Clearly, the governments push on infrastructure is helping, and movement of goods across the country has gone up, he said in an interview.

Sources said consumption of industrial lubricants is benefiting especially from the health of industries such as steel, which is needed for the auto industry, and cement, which is being used for infrastructure. India has replaced Japan as the worlds second-largest steel producing country after its crude steel production in 2018 rose 4.9 percent to 106.5 million tons, according to the World Steel Association. Gokhale noted that analysts expect cement demand to grow by 7 percent to 8 percent in the current fiscal year, which runs through the end of March.

Rajib Kumar Saha, lubricants business manager at Brenntag Ingredients India Pvt., said rising agricultural income spurred increased lubricant demand from that industry, too.

Individuals interviewed for this article offered varying outlooks for the market in 2019. Hareesh Nalam, senior consultant at Kline, saidthe governments 2019 interim budget includes [benefits] to low- and middle-income segments, particularly in the rural economy, which may translate into economic growth in those markets.

That may help drive the demand, he said. He added, however, that continued global economic slowdown may have an impact on Indias export industries.

Sources agreed that auto sales should continue spurring growth, but some maintained that the industry sent mixed signals last year. Klines Nalam said sales of passenger vehicles tapered down towards the end of 2018.

Gulf Chief Technology Officer Y.P. Rao agreed that passenger car sales are slowing and that sales of commercial vehicles decelerated later in 2018, but he added that the two-wheeler segment is still strong and that four-wheeler sales will probably get a bump in 2019 from buyers trying to beat the implementation of Bharat Stage VI automobile emissions standardsin April 2020.

India plans to leapfrog from the current Bharat Stage IV automobile emissions standard directly to BS VI in April 2020, skipping BS V to tackle the nations worsening air pollution. BS VI is equivalent to the European Unions Euro 6 standard and is expected to raise vehicle costs and to force engine design changes that require more advanced engine oils.

Gokhale was again the most bullish, arguing that shifting demographics, rising disposable incomes, urbanization, the maturing transport landscape and 2017s adoption of the Goods and Services Tax regime are all pulling lubricant demand in the same direction: upward.

These are the factors that will contribute to the lube growth in India and therefore, I will not be surprised if the domestic lubricant market grows over 5 percent in 2019, he said.

Whether the Indian market hits that target, observers have said its outlook is strong compared to Western markets, where lube consumption has been flat to declining, and China, where demand growth has slowed the past few years.

India is clearly a sweet spot as far as lube market demand is concerned due to the growing economy, Gokhale said.