Slow Decline Forecast for European Market


Slow Decline Forecast for European Market
A view of traffic on the streets of Madrid, Spain, at sunset. © Alejo Bernal

BARCELONA, Spain – Europe’s finished lubricant demand is expected to stagnate during the next few years, affected by the continent’s continued energy crisis and high energy prices, in addition to the gradual transition towards carbon-neutral industry and electric vehicle mobility, an industry event heard here recently.

In Europe, total finished lubricant demand stood at 6.5 million tons in 2022 and is expected to decline to decline at a 0.5% compound annual rate to about 6 million t/y by 2027, and this ballpark figure is then expected to stay flat to 2032, according to Kline & Co., a United States -based consultancy.

Germany and France, the largest European economies, each will see about 1.5% decline of its commercial and passenger car lubricants demand by 2027.

“We have seen certain positive developments in the countries of the Central Europe, but overall the European market is in decline, impacted by the slow demand in the largest economies of Western Europe,” Sharbel Luzuriaga, industry manager in Kline’s energy practice, told the ACI’s European Base Oils and Lubricants conference held here Nov. 14.

Luzuriaga is based at the consultancy’s office in Prague.

He said that the Germany’s total finished lube demand will stagnate by 2027, while France’s could tip at about a 0.2% compound annual increase. All other big European markets, such as United Kingdom, Spain and Poland, will see a minuscule compound annual finished lube demand growth, ranging from 0.5% to 1%.

Global finished lubricant demand stood at 39 million tons in 2022, of which motor oils accounted for nearly 40%, according to Kline.

The consultancy found that penetration of synthetic lubricants is much higher in the developed nations of Europe and North America, compared to the developing countries of Asia-Pacific, South America, Africa and the Middle East.

In the passenger car motor oils segment, the penetration of full synthetic motor oils in Europe in 2022 was over 60%, more than the 50% in North America. In Asia-Pacific, South America, Africa and the Middle East regions, the use of synthetics in 2022 stood at less than 50%, around 25% and around 15% of the total respectively, Kline found.

In the heavy-duty motor oil segment, in 2022 Europe led the way with use of synthetics comprising 40% of the total, followed by South America where synthetics in HDMO consisted around 17% of the total. North America and Asia-Pacific used less synthetics in the segment in 2022 – each about 9% of the total.

“In some regions, the share of synthetics continue to remain low in the HDMO segment as commercial fleets are very price-sensitive and exhibit a reluctance in shifting to synthetic products,” Luzuriaga observed.

Prompted by the fuel economy and drive towards the carbon neutrality, passenger car motor oil demand by viscosity grade in the top 10 leading global markets of United States, China, Japan, India, Indonesia, Brazil, Germany, Mexico, South Korea and Russia, makes a steady transition towards greater use of high-quality lubricants, according to Kline.

“The 0W viscosities will increase their share from about 10% of the total global PCMO demand in 2020 to about 40% of the total by 2032,” Luzuriaga said. “The use of 5Ws is expected to decrease from about 50% of the global demand in 2020 to about 45% in 2032.”

In the HDMO segment globally, 10W viscosities will lead in demand growth , with a share that is expected to increase from less than 10% in 2020 to about 25% in 2032, while 15Ws will be the main viscosity choice during this period.

Kline also found that the passenger car motor oil demand will be dramatically impacted by the increasing electric vehicle penetration and shared mobility developments on the global level, including in the 14 leading country markets of Australia, Brazil, Canada, France, Germany, India, Japan, Mexico, South Africa, South Korea, the United Kingdom and the United States.

In its baseline scenario, the consultancy expects the adoption of EVs to cause a 14% decrease in the global passenger car motor oil demand by 2035. Beyond, the decrease in the global motor oil demand is expected to be much steeper, and to plummet by 50% from 2036 to 2050.

“The progression of EVs is gaining signification traction [in the 14 leading markets], driven by a combination of stringent emission norms and favorable policies, incentivizing EV purchases, while stimulating the establishment of the necessary EV ecosystem – notably an adequate charging stations infrastructure,” Luzuriaga said.

He added that a similar trend will be observed in motorcycle oil demand, while the Impact on the HDMO demand will be smaller than that on the PCMO demand.

The penetration of passenger EVs, including hybrid and plug-in hybrid EVs in the 14 leading countries is expected to increase from around 5% of the total fleet of about 890 million active units in 2022 to about 25% of the expected total fleet of 995 million active units by 2032.

“However, by 2032 the primary mode of personal transportation will still be internal combustion engine cars, with about a 75% share of the total active fleet,” Luzuriaga said.

Kline expects the use of ICEs to decrease significantly in the 2030s and 2040s. However, they will still play a major role, and by 2050 their share is expected to be about 40% of the total fleet of about 950 million units.