Finished lubricant demand in the Middle East is projected to grow at a compound annual rate of 1.4 percent over the next five years to nearly 1.8 million metric tons, with industrial lubricants accounting for most of the increase, consultancy Kline & Co. predicted.
In a May 2 webinar, Kline estimated the Middle Easts lubricants demand to be around 1.4 million to 1.7 million tons in 2017 – about 500,000 to 600,000 tons in the commercial automotive segment, 500,000 to 600,000 tons industrial lubes and 400,000 to 500,000 tons consumer automotive.
Iran is the largest market in this region, having also the largest automotive parc of all the countries in the region, said Sushmita Dutta, a project manager in Klines Energy Practice. Also, Iran has a much larger industrial base compared to the [Gulf Cooperation Council] countries. Saudi Arabia was second in consumption, Kline estimated, followed by the United Arab Emirates, Oman, Kuwait, Qatar and Bahrain.
She noted that among GCC countries, the industrial sector is not very diversified, whereas Iran has a much more diversified industrial sector. Major industries in the GCC countries include power generation, oil and gas, petrochemicals and chemicals. By contrast, she noted, Irans key industries include general manufacturing, automotive manufacturing and agriculture.
Economies are focusing on diversifying industries, so going forward we expect more industries to come up – maybe manufacturing industries – which could bring in demand for other types of lubricants that currently do not have a significant demand in this region, she said.
Hydraulic fluids are the largest product category in the industrial segment, followed by process oils and industrial engine oils, she said. Process oils include transformer oils, rubber process oils and white oils. However, demand for rubber process oils and white oils is extremely low in this region because there is not much manufacturing of rubber tires, pharmaceuticals or cosmetics, Dutta said. The bulk of process oils demand is for transformer oils or electrical oils.
Engine oils included under the industrial segment include products such as marine engine oils and stationary diesel engines, with marine engine oils accounting for the larger share. This is because other countries in this region have shipping and logistics activities, so U.A.E. being a big trade hub has a significantly higher demand for marine lubricants, she added.
Demand for metalworking fluids is extremely low because the region has so few metalworking industries. Some automotive manufacturing and metal processing is present in Iran, she observed, so that country has some demand for metalworking fluids. Bahrain has some aluminum manufacturing activities.
In the passenger car motor oil segment, 20W-40 and -50 engine oils continue to account for the lions share of demand in the Middle East. These grades have been in use in this region for a long time now, and this explains why they have such a huge share, she said. However, in recent years, we have seen growing usage of lower-viscosity lubricants, especially 5Ws. And we expect that in the next five to 10 years demand for 5Ws would surpass that of 10Ws.
In the commercial segment, Kline expects the Middle East market to transition gradually from a monograde heavy-duty motor oil to a multigrade market. Multigrades are higher quality lubricants made of higher quality base oils, which last longer than monogrades, Dutta said.
Rapid urbanization will fuel growth in infrastructure development, she said, which will drive demand for commercial automotive lubricants in the next five to 10 years.
Kline found synthetic penetration low in the region, with the highest percentages in the consumer automotive segment, which is not as price sensitive as the commercial or industrial segments.
The commercial segment is very price sensitive. Truckers and mechanics are of the belief that because of climate conditions in the region, thick oils are required, and oils should be changed quite frequently, she said. So they dont see the value of using lubricants products costing two to three times more than conventional lubricants since they will still want to change the oil frequently, she added.
She said that for finished lubricants to grow in the Middle East, it will be important for both automotive and industrial lubricants demand to grow. In recent years, weve seen a sudden and drastic decline in automotive sales in this region, especially in GCC countries, because of the economic slowdown in this region, she said. However, going forward, we would expect that automotive sales would recover.
Kline found that leading suppliers in the fragmented Middle East lubricants market are Shell, Petromin of Saudi Arabia, Behran Oil of Iran, and ExxonMobil. Apart from these companies, there are a variety of suppliers catering to this market, she said. These suppliers are national oil companies, local blenders and regional suppliers as well as private label brands and OEM brands that are being sold in this region.