Mexican Market Thrives

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JERSEY CITY, N.J. – Independent lubricant brands account for half of Mexicos 644,000 metric ton per year finished lubricant market, and lubricant quality continues to rise, according to Comercial Roshfrans.

Its difficult to get data on the Mexican market, Victor Franco Paredes, operations director for Comercial Roshfrans, told the ICIS Pan-American Base Oils & Lubricants Conference here on Dec. 3. Paredes interviewed suppliers, customers, government sources and other blenders to provide an update on Mexicos base oil and lubricant markets.

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It is a growing market with a high level of competence and too many competitors, said Paredes. There are around 200 companies [supplying] finished lubricants; many of them do not fulfill international quality standards.

But higher-tier products are being adopted, and both North American and European original equipment manufacturers have a strong influence. The Mexican market is seeing growing product differentiation, with more and more niche products that feature special components or that target special customer groups.

Base oil demand, said Paredes, is estimated to reach more than 648,000 metric tons this year, up from 637,000 tons in 2009 and 630,000 in 2008, but still below 2007s 655,500 tons. Sixty eight percent of todays demand is imported, and Mexicos Pemex API Group I refinery in Salamanca provides the remainder.

Group II base oil demand has grown from 12 percent of total paraffinic demand in 2008 to an estimated 17 percent in 2010, he continued. Group III demand is very small but growing.

The United States supplies 92 percent of Mexicos imported base oils, followed by Curacao with 2 percent and other countries with smaller amounts. Just 32 Mexican companies import 90 percent, by volume, of total base oil imports.

Turning to finished lubricants, Paredes said total demand is expected to top 644,000 tons this year, up from just 568,000 tons in 2009, and even well ahead of 2007s 631,500 tons. About 65 percent of the lubricants consumed in Mexico are blended in Mexico.

About 226,000 tons of imported lubricants come primarily from the United States (90 percent), South Korea (4 percent) Canada and Japan (2 percent each).

Passenger car motor oils make up 35 percent of the total Mexican lubricant market, and heavy-duty diesel engine oils make up another 28 percent. All other engine and industrial oils and greases make up the remaining 37 percent.

Monograde engine oils dominated as recently as 2004, said Paredes, when they held more than 60 percent of the passenger car motor oil market and over 80 percent of the heavy duty market. Despite a recession-driven blip in 2007, multigrades share of the passenger car market have risen steadily to over 50 percent today. On the heavy duty side, multigrades share has more than doubled to just over 40 percent.

Nearly 30 million registered vehicles are in circulation in Mexico today, up from fewer than 25 million in 2007. The average age for the total fleet is 11.6 years.

Mexico is a major car-producing nation, Paredes noted. Automakers will produce an estimated 2.2 million cars there in 2010, with about 83 percent earmarked for export. Top automakers, ranked by sales in Mexico, are Nissan, General Motors, VW (which is strong and rising), Ford, Chrysler, Toyota, Honda and others.

About 80,000 trucks and buses are made in Mexico by 12 international OEMs, including Mercedes Benz/Detroit Diesel, International, Kenworth, Ford, GM, VW, Volvo, Scania, Man, Isuzu and Hino Dina.

Looking at the future, Paredes highlighted the emerging trend of greater product differentiation and segment specialization by the industrys larger players. There are opportunities to take the market to higher tier products to meet both OEM and environmental requirements.

Group II and III base oils will continue to be imported in larger quantities, while the tight market for bright stocks and heavy neutrals is a growing challenge for blenders. But as automakers continue to make huge investments in Mexican new-car production, opportunities to supply both automotive and industrial lubricants will continue to grow.

For success in Mexico, Paredes concluded, you need branding and marketing and strategy; you need a distribution network; and you need a big portfolio of products.

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