Fuchs: China Sags, Sustainability Looms


Ostfildern, GERMANY – Global lubricant demand is sagging due to a slowdown in China – the market largely responsible for a slow but steady expansion over the past decade, an official from Fuchs Petrolub SE told an industry conference here last month.

After growing at a cumulative annual rate of 4.5 percent from 2007 through 2018, the pace of growth in the Chinese market petered to just 1 percent in 2019, Fuchs Chief Technology Officer Lutz Lindemann said during a presentation to the International Colloquium on Tribology here at the Technische Akademie Esslingen. Without the Chinese market to carry it, global demand will grow just 0.5 percent this year, according to Fuchs forecast.

Lindemann said the lubes industry faces even bigger disruptions in the medium and long terms, mostly due to the global movement toward sustainability.

After the Great Recession, from 2010 through 2018, global lube demand increased 7 percent to 36.7 million metric tons per year, not counting marine lubricants, Fuchs estimates. The biggest factor in that increase was China, Lindemann said, which grew to surpass the United States as the worlds biggest market. The Mannheim, Germany-based lube marketer pegs Chinese demand at more than 7 million t/y in 2019, compared to 6 million t/y for the United States, where demand has been slowly shrinking for the past decade.

Lindemann, who is also a member of Fuchs executive board, said Chinese lube demand growth is slowing both because of changes in its economy and because of problems such as the trade war with the U.S.

China, what we see, suffers significantly with the tension between U.S. and China and the trade restrictions and the trade war, he said during an interview following his presentation. We see a significant reduction [in lube demand] in China due to this threat. We see it already in China in 2019 – only a growth of 1 percent. And probably will stay at this level of growth. In coming years, China is probably not driving the [global] market volume-wise, but we think quality-wise still. But in China the growth scenario is over.

He added that Fuchs does not expect any other markets to pick up the slack.

We see no significant growth in other markets, he said. The overall market may stay at this level of 36 million tons with a slight growth of point something percent, but no significant growth to be expected.

Taking a further view, the industry faces no shortage of disruptions, Lindemann said. Natural trade flows are being interrupted by a number of political conflicts, including the United States trade war with China, tariffs that it has imposed on a number of other countries, ongoing conflicts such as the one over Irans nuclear program and the erosion of the European Union. Trends and practices such as Big Data, digitalization and growing use of sensor techniques are beginning to impact the industry and are expected to significantly alter the way lubricants are developed and how they reach customers – offering new entries to market and posing threats to existing suppliers.

But the biggest disruptions, Lindemann predicted, will come from the move to sustainability – a movement that is being embraced most strongly in Europe but that is also steadily gaining traction in other regions. The European Union, for example, has adopted a target of reducing its carbon footprint by 40 percent by 2040, on its way to becoming carbon dioxide neutral by 2050. There are proposals to make an economy where CO2 impact is factored into the pricing of various materials.

Lindemann sees sustainability having such a big impact because it affects so many aspects of the lubes industry, from the way people travel and the types of vehicles they use to the regulations and customer requirements with which lube companies will need to comply to the raw materials they will use and the finished products they will supply.

Changes in mobility patterns, such as a shift toward transportation as a service and the use of autonomous vehicles, are expected to affect who operates vehicles and therefore who procures lubricants. The bigger change, however, will come from the shift to electric vehicles.

E-mobility is not only a change in the drivetrain of vehicles, Lindemann said. The value chain of electric drivetrain components is, as well as raw materials and energy supply chain, mostly different from conventional drivetrains. This will completely change the [automobile] industry and also our business.

Performance requirements lubricants used in hybrid vehicles is somewhat different from those used in autos powered solely by internal combustion engines, and the differences are more drastic for vehicles running only on battery power – both for fluids and greases. As EV batteries become larger and more powerful, thermal management will become an ever-bigger challenge for the lubricant industry to help solve. EV coolants could become a major new category of products.

At the same time, the rest of the value chain for EVs will undergo significant evolution. Lindemann said batteries will become a bigger portion of that chain – accounting for 60 percent of a vehicles total cost while other components are replaced with lighter-weight materials. Fuchs predicts that the number of machines parts in automobiles will fall by 70 percent and that different methods – such as forming – will be used for the remaining 30 percent.

While predicting that EVs will erode lubricant demand in some markets, Lindemann emphasized that the impact will vary by region, and he insisted that global volume demand will not suffer much. In the European Union, the shift to EVs should reduce automotive lube demand by between 10 and 20 percent by 2035, Fuchs predicts, and lead to a 30 percent reduction in consumption of metalworking fluids but no net change in demand for other industrial lubricants. In the U.S., the company expects e-mobility and efficiency gains to take 20 percent off the top of lubricant demand over the same time span.

In China, though, the company expects automotive lube demand to rise by 15 to 20 percent – thanks to projected growth in the number of ICE vehicles – and consumption of metalworking fluids and other industrial lubes to remain stable. That adds up to a forecast of 10 percent growth in Chinese lube demand, which would help limit to global decline to 2 or 3 percent.

Does DrivElectric damage demand? Lindemann said. No, DrivElectric diverts demand.

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