Hopes, Hurdles for Russian Lubes


MOSCOW – LukOil is confident that Russias lubricants market is rebounding in 2010 as the economy recovers from the financial downturn, but the industry faces impending problems.

The country is expecting growth in almost every macro-economic sector, Maxim Donde, general director of LLK-International, told the Lubricants Russia 2010 conference last week. The fastest rate of growth is observed in lubricants-demanding industries such as machine-building and processing, and in all types of automotive transport. LLK-International is Russian oil major LukOils lubricant arm.

Owners in the commercial vehicle sector as well as owners of private automobiles have shifted their selection of lubricants, said Donde. Product efficiency is becoming consumers key factor in choosing the right lubricant.

Customers tend to choose expensive, high-performance premium lubes. They understand that these oils are tech-wise and cost effective, Donde said. Therefore, at the moment, we have seen faster demand growth in premium lubricants, compared to the pre-crisis period. The priority of all major lubes producers in Russia today is development and production of high-end synthetic motor oils, he noted.

Foreign passenger-car brands make up a major portion of the Russian vehicle fleet, and LukOil expects they will continue to see steady growth. Foreign brands produced since the beginning of 2005 constitute 46 percent of the countrys total passenger-car vehicle fleet, Alexei Fillipov, LLK-Internationals deputy general director for production, science and technology development, told conference participants. But, he added, half of those foreign-car brands in 2009 were produced in Russia.

Foreign-branded commercial vehicles make up only 12 percent of the countrys total commercial vehicle fleet, and its tendency is toward modest growth, according to Fillipov.

A main characteristic of the countrys car market is that a big share of these cars have expired warranties. Therefore, their owners have freedom to choose any lube brand for their oil-change service, Donde observed. A main objective of Russian lube marketers now is to offer their customers premium lubes of the same quality as their foreign competitors lubes, he added.

An interesting characteristic of the Russian lube market since 2009 has been intensifying competition among the countrys main industry players, Donde continued. The crisis made Russian lube majors turn to new marketing approaches for more effective business, he said. While last year we have seen severe optimization of the business, in 2010 we observe the resumption of several lube majors modernization programs aimed at increasing the quality and quantity of the products offered.

However, said Donde, the Russian lubricants industry has a couple of serious, persistent problems: the quality of domestic base oils and the lack of qualified professionals.

The countrys base oil producers have to work harder to achieve the quality and standards of international base stock production, Donde stated, adding that many Russian lube majors have announced plans for modernization which they hope to finish in the shortest term. This will foster faster and easier approvals by the domestic and foreign OEMs and would solidify the position of the Russian base oil producers vis-a-vis their foreign competitors, he said.

The other important problem facing the Russian lubricants industry is the lack of qualified professionals. The problem exists both within the Russian companies and the scientific and research institutes. Lubricants industry science has been going through really hard times in the last decade. Younger to middle-aged scientific personnel are practically nonexistent, Donde said.

Base oil and lubricants producers have little support form the once powerful scientific base that flourished in the Soviet universities, Donde noted. We have to discuss how to revive the academic lubricants and tribology sciences, and integrate them with the existent companies R&D departments and labs that need such collaboration, he concluded. The future of the Russian lubricants industry depends on well educated and trained industry specialists.

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