Central, Eastern European Markets Looking Up

The economies of countries in Central and Eastern Europe have been relatively buoyant in recent years, making their small and fragmented lube markets worthwhile to outsiders, an official with Hungarian lube maker Mol-Lub Ltd. said at a recent conference in Antwerp.

The Czech Republic, Hungary, Slovakia and Romania collectively demanded 346,000 metric tons of lubricants in 2016, Akos Nemesnyik, Mol-Lubs product development and application manager, told the ACI European Base Oils and Lubricants conference on Nov. 29. Even together, these countries are not big players on European level, Nemesnyik noted, explaining that the group collectively comes in as the fifth-largest lube market in Europe behind Germany, the United Kingdom, France and Italy. But when it comes to gross domestic product, the four countries have grown at rates of 3 to 4 percent in recent years, which is higher than the European Union average. The countries all rely on foreign investments and have similar economic structures, he added.

The Czech Republic has a particularly large industrial base, and the automotive industry has contributed to strong GDP growth in all four countries, Nemesnyik said. In 2016 the split between automotive and industrial lubricant consumption was 45 to 55, he noted, adding that industrial lubricant consumption is higher in the Czech Republic and Slovakia, while Hungarys industrial demand is smaller because it has a large agricultural sector.

Lubricant demand in all four countries dropped significantly during the Great Recession. Demand in the Czech Republic returned almost to pre-crises levels in 2016, but the markets of the other countries will never fully recover, according to Mol-Lub.

Little growth is recorded in the Czech Republic and Slovakia, while in Romania and Hungary we have seen flat lube demand from 2010 onwards, Nemesniyk said.

In 2016 the Czech Republic consumed 140,000 tons of lubes, followed by Romania at 103,000 tons, Hungary at 62,000 tons and Slovakia at 42,000 tons, Mol estimated.

Mol is the largest lubricant marketer in the region with a 12 percent share of demand in the four countries, followed by French energy giant Total at 9 percent, and the Czech Republics Paramo and the United Kingdoms Castrol, with 7 percent each. Other important market players include Shell, ExxonMobil, Lukoil and Fuchs, Nemesniyk said.

Mol-Lub, the largest lube marketer in Hungary, produced 65,000 tons of finished lubricants in 2016. In the Czech Republic, the largest lube marketer is Paramo, which produced 25,000 tons. In Romania, Russian marketer Lukoil produced 17,000 tons of finished lubricants in 2016, followed by local marketer Lubrifin, which supplied 12,000 tons.

Paramo and Mol are the only base oil producers in the area. Paramo operates a plant in Kolin, Czech Republic, with capacity to make 115,000 t/y of API Group I base stocks and 15,000 t/y of Group II. It also operates an 80,000 t/y Group I plant in Paradubice. Mol operates a 198,000 t/y Group I plant at its refinery in Szazhalombobatta, Hungary.

Mol found that the base oil supply and demand in the four countries was not balanced. Last year the region churned out 245,000 tons of Group I base oils while it demanded only 90,000 tons. We have a supply-demand misbalance in the Group II and Group III base oil categories as well, Nemesnyik said, adding that it is because of the uneven distribution of the various grades needed for premium products.

This led these countries to import high quality Group II and Group III base oils from such destinations as the United States, Europe and Asia, according to Mol-Lub.

locator map of CEE countries

Image: Wikimedia Commons