Rosy Outlook for MidEast Industry


DUBAI, United Arab Emirates – With its emphasis on infrastructure investment and economic diversity, the Middle East is a growing and untapped industrial lubricant market, one expert contends.

Manufacturing accounts for a growing percent of both gross domestic product and exports in the Middle East, as many nations in the region have poured billions of dollars into infrastructure and industries, Mehrdad Vajedi, Middle East area sales manager for Nynas AB, told this months ICIS Middle Eastern Base Oils & Lubricants Conference here.

The Middle East is a 1.7 million ton per year finished lubricant market, said Vajedi. Industrial lubricants currently comprise about 26 percent of that total, about 440,000 tons per year.

The largest country markets are Iran (consuming 39 percent of the total), Saudi Arabia (21 percent), Iraq (10 percent), Syria and U.A.E. (7 percent each), Yemen (5 percent) and Kuwait (3 percent). Lebanon, Jordan, Qatar, Bahrain and Oman account for the remaining 8 percent.

The Middle Eastern industrial lubricants market has some strong advantages, Vajedi said, including base oil availability, industrial growth, low manufacturing costs and market access. However, lack of formulation expertise, lack of OEM relationships, and lack of blending capability are challenges in many countries.

Overall, however, Vajedi said the positives outweigh the negatives. The region is seeing increasing research and development investment, opening of research parks and funding for education, particularly in Saudi Arabia. It has good infrastructure for exports, particularly in U.A.E. Many countries offer ease in doing business, including Saudi Arabia and U.A.E.

And not least, the regions use of new communication tools provides easy access to end users. The Middle East and Africa together account for 7 percent of total Linked-In members, he said, and 12 percent of these are from technical or purchasing departments.

The regions industrial lubricants segment has grown for the past five years and is expected to increase steadily. Broken down by products, hydraulic fluids make up 48 percent of the regions industrial lubricant consumption; this segment is growing fast. Likewise, metalworking fluids (11 percent), compressor oils (4 percent), turbine oils (3 percent) and miscellaneous other industrial lubes (14 percent) are growing fast. Slower growing segments include gear oils (12 percent) and greases (8 percent).

Demand for industrial greases in the region is about 35,000 metric tons per year, primarily lithium soap greases.

Vajedi offered an overview of the regions growing industries. Energy-intensive industries are mostly lube-intensive industries, he noted with a smile. Metals, oil, gas and petrochemicals, automotive, cement and mining are the main consumers of lubricants, and the industrial segment is a powerful leverage for engine oils sales.

Steel is a key industry in the region. The Gulf Cooperation Council as a whole, said Vajedi, has a per-capita average steel consumption of 645 kilograms, which is well above the world average of 240 kg. Iran and Saudi Arabia dominate in steel production. The industry is hungry for hydraulic fluids, metalworking fluids, rolling oils, gear oils, mill greases and other industrial lubricants.

Aluminum is another important industry in the region. The GCC produces 7 percent of the worlds total primary aluminum, with seven smelters. Demand for aluminum is growing for the automotive and solar industries of the region.

There are around 130 cement plants spread over the Middle East, Vajedi continued, producing about 150 million tons per year. Gear oils and greases are in demand for these plants, as are industrial engine oils, hydraulic fluids and other oils.

Automotive manufacturing is yet another key industry. The region produces 1.5 million units a year, primarily in Iran, but auto plants are on the drawing board elsewhere, including Bahrain, Syria, Saudi Arabia and U.A.E. The GCC has 300 parts manufacturing plants, including 180 in Saudi Arabia.

Textiles, petrochemicals, power plants … the list of lubricant consuming industries is growing, said Vajedi. The GCC plans to complete the first 2,200 kilometers of a railway network by 2017, with major additional investments planned through 2020. This will spark demand for industrial oils and greases as well as locomotive engine oils.

And last but not least, said Vajedi, over U.S. $60 billion is earmarked to build infrastructure in Qatar in preparation for the FIFA 2022 World Cup. Those projects will need a lot of industrial lubricants.

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