Uncertainty looms over the future of marine lubricants as the shipping industry looks to cut costs and regulations come to fruition requiring formulation changes, said an industry insider at a conference held in early August.
With the shifting of ports, with the shifting of products and with the question of what to use, 2020 is a very uncertain picture, said Caroline Huot, Cockett Marine Oil Groups global head of lubricants, at the Asia, Middle East and Africa Base Oil, Lubricants and Wax conference held in Mumbai.
The shipping industry, which is driven by the global economy, is the primary purchaser of marine lubricants. Although the industry has clawed its way out of crisis since the rapid downturn in the global economy ten years ago, the marine lubricants market is still seeing changes.
The main driver of that market used to be operations optimization and the availability of 24 hour service. The financial crisis of 2008, however, has slowly changed that. Now, the main driver is cost.
Since the crisis, through information tools and the pressure of cash flow, the shipping industry has begun counting cents, Huot told attendees. Today, the cost driver is here to stay.
A ships stores and lubricants make up 23.07 percent of the voyage cost, according to Huots data. A ships stores are the supplies and equipment required for the operation and upkeep of the ship [The ship owner] can do something about the cost of his lubricants. That is why the cost has appeared in the last few years as the main driver, she explained.
In addition to analyzing the cost-effectiveness of their lubricants, ship owners are looking for products that are compatible with new practices aimed at meeting the International Maritime Organizations 2020 sulfur cap. The IMOs deadline reaches the industry in less than 500 days.
Low fuel sulfur levels require cylinder oils with a low base number; however, slow steaming - which saves on fuel costs - in combination with redesigned, more fuel-efficient and larger stroke-to-bore ratio engines require higher BN cylinder oils. These opposing requirements are necessary to meet the needs of modern ships recently designed to meet IMO regulations, explained Huot.
How can you do both in the same engine at the same time? is the question I am asking [and] challenging marine lubricant suppliers to answer, because within 500 days of the deadline I have not seen the answer anywhere, Huot asserted.
The changing needs of the shipping industry due to compliance with IMOs sulfur cap provide marine lubricant players with the opportunity to offer new products that fit the needs of their customers upon solving the aforementioned formulation conundrum.
What Huot finds particularly interesting, however, is not the issue of how to formulate oils for the requirements of the fast-approaching deadline, but the large share of the market held by independent lubricant blenders and distributors.
It is an industry dominated by majors, but what is really interesting is [that] a 22 percent share is independents. This share was 5 percent ten years ago, Huot said.
Last year, the marine oil lubricants market totaled 2.3 million tons, valued at roughly U.S. $4.5 billion. ExxonMobil held 21 percent of that market, with BP Castrol following closely behind at 18 percent and Shell holding onto 16 percent. Total Lubmarine, Chevron and Lukoil made up 13 percent, 7 percent and 3 percent of the market, respectively. The remaining 22 percent was held by independent companies like Z Energy, a New Zealand distributor offering Caltex products.
Many customers are still deciding how they will manage the new regulations, and the choices they make will influence what they need from a lubricant perspective, Z Energys External Communications Manager Sheena Thomas told Lube Report.
Although the marine lubricants market holds considerable challenges, it offers complex rewards, claimed Huot. All the customer-friendly, marine-friendly suppliers will have a chance to take a share of these opportunities.