Base Oil Market Roiled by Change

CANNES, France - The base oil market is changing as the industry tackles new sources of product, increasingly demanding lubricant performance requirements and a variety of other challenges, an industry insider said at an event here on Oct. 25.

Speaking at the Union of the European Lubricants Industrys annual congress, Lubrizol Global Marketing Director Mike McCabe presented a birds eye view of the market, highlighting increasing production of API Group II and Group III base oils spurred by demand from the automotive lube segment, which is requiring driveline fluids that last longer while enabling improved fuel economy.

According to McCabe, the global base oil market is on pace to add 9 million metric tons per year of Group II capacity and 4 million t/y of Group III capacity in the several years running through 2023. That includes 2.6 million t/y of capacity reported to have come onstream in China in the past 18 months and 1.2 million t/y of Group II capacity that ExxonMobil opened this year in Rotterdam, Netherlands and in Singapore.

The flurry of projects in China is turning what had been the worlds largest base oil importer into a market with surplus capacity. Analysts say that means refiners that have exported to China will either have to be more competitive or look for new markets. Europe might to be an interesting proposition, and blenders there could opt for Asian base oils.

McCabe highlighted several market challenges, chief among them concerns surrounding lubricants of the future, such as forecasted increases in demand for base oils with very high viscosity indices and low Noack volatility. Polyalphaolefins - which are classified as Group IV - have been one of the tools used to formulate such oils, but McCabe said, There is not enough Group IV base oil in the world to move the European market, so Group III base oils have a role to play. Capacity will have to be developed and made available.

He also predicted that sustainability will become an increasingly important criteria for evaluating base stocks. Our industry has to work out how to assess the base oils and what impact they will have on lubes. We have to know this, as it will become a factor for the product we sell, said McCabe.

Base stocks recycled from waste lubricants could check a sustainability box, but McCabe said its not yet clear if rerefined Group II or Group III base oils will meet performance demands. Were at the beginning of understanding the difference that this makes, but this too is a topic we need to discuss.

The industry is also coping with limited testing capacity, calls for more base oil interchange guidelines and introduction of new base oil slates. Meanwhile, engine oils are trending toward lower viscosity as part of the push to help improve fuel economy. McCabe said such trends are all the more challenging because of the speed at which they can move.

China became a 5W market in under a decade, so changes happen fast, he said. When markets shift fast, it becomes harder to keep vehicle owners informed.

Half of the passenger cars in Europe are running on lubricants that are not appropriate, McCabe remarked, stating the industry needs to position oils in the market for the type of vehicle for which theyre intended. As examples, he pointed to Asian markets where oils marketed specifically for sport utility vehicles and hybrid electric vehicles have been launched.