Challenges, Opportunities Seen in Western Europe

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ANTWERP – Germany and the United Kingdom had the highest lubricant demand among European Union countries in 2016, a new Union of the European Lubricant Industry report found, although the factors impacting demand were different in each country.

The nature of different economies across Europe is very apparent, Valentina Serra-Holm, president of the trade group, told ACIs European Base Oils and Lubricants Interactive Summit held here Nov. 29. As an industrial heartland, Germany is different in nature to a service-led economy such as the U.K., and lube production and consumption differ in these countries due to the very nature of their economies.

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Germany is the strongest performer in the region, according to the report. After the financial crisis in 2009, the country lube market recovered fast and has stabilized at a high level, confirming Germany as the largest producer in the region, Holm said. The key to that success has been the ability of German producers to focus on high quality specialty products to meet the increasingly challenging demand of the industry, she noted, especially in niche, high value added applications.

In 2016, German lubricant demand amounted to 960,000 tons. The market is dominated by industrial lubes, with turbine oils, hydraulic oils and general machine lubricants having decreased [in volume] due to improved efficiency, while metalworking fluids have increased.

The U.K.s lubricant sales have not been affected by the economic uncertainty of the countrys planned exit from the European Union, and the countrys total lube sales increased marginally during 2016, the study found. In 2016 lube demand for the country stood at 570,000 tons. Engine oil sales had declined from 1995 to 2010, but the trend then reversed, Serra-Holm observed, due to an increase in initial factory fill oils spurred by the excellent performance of the U.K. automotive industry.

After an initial recovery post-crises, the French market suffered a decline. Volumes generally stabilized since 2014, though the market shrank slightly in 2016. Higher sales of industrial and automotive lubricants was not enough to offset a decrease for process oils In 2016 France consumed around 550,000 tons of finished lubricants.

UEIL found that Spain and Italy have shown similar recovery paths. Driven by the automotive sector, Spains lube market grew in 2016, while the Italian recovered both in the automotive and in industrial sectors. In 2016 Spain consumed 460,000 tons of finished lubes, while Italy consumed 440,000 tons.

UEIL is set to publish its first annual statistical lubricant demand report in full later this year.

The report uses official market data from eight E.U. countries – Germany, France, the United Kingdom, Italy, Spain, the Netherlands, Belgium, Austria, Denmark, Finland, Greece, Ireland, Luxemburg, Poland, Portugal and Sweden – supplemented by estimates for a further 10 countries. Market data for Turkey and Switzerland, which are members of UEIL but not the E.U., is also provided. The E.U. countries account for an estimated 85 percent of demand across the 28-nation bloc.

The industrial segment accounts for 53 percent of lubricant demand in the European market while automotive lubricants make up 47 percent. Although the market has recovered since the 2009 crisis, it is still far from the pre-crisis levels, Serra-Holm said.

Despite gross domestic product growth and increased population in the region, the E.U.s total lubricant consumption has declined from 5.3 million tons in 2006, to 4.2 million tons in 2016. Automotive engine oil consumption stood at 2.3 million tons in 2006, and slumped to 2 million tons in 2016. During the same time, industrial oil consumption shrunk from 3 million tons to 2.2 million tons, Holm said.

The regions lube consumption per capita has progressively declined in the past two decades, the report claims. Per capita consumption of lubricants has fallen from a high of around 12.6 kilograms per person at the start of the century to around 8 kg per person in 2016, and this reflects more effective use of lubricants, asserted Holm.

This trend was driven by improved lubricant performance through the widespread adoption of synthetic lubricants. This is particularly visible in the automotive formulations where sales of engine oils has decreased even though the vehicle population has increased, Holm said.

The report estimates that increased lubrication efficiency in the automotive sector will likely decrease lube demand in the years to come. A similar trend is expected in the industrial sector. In the long term, the e-mobility trend may be a significant impact on the European lubricant industry, primarily in the automotive sector and to a lesser extent in the industrial sector. Serra-Holm observed.

Another challenge of the lubricant industry is the raw material availability with API Group I base oil rationalization and chemical industry consolidation, the implementation of the REACH legislation and increasing complexity by the original equipment manufacturers demand and by the regulators.

Opportunities for the European lube industry include drive towards quality space for dedicated flexible users, sustainability and niche high value markets, according to the report.

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