U.S. Rerefining on Cusp of Growth

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LISBON, Portugal-While Europe is the worlds largest producer of rerefined lubricants today, the United States could challenge for the top spot within the next decade if all of the announced construction projects are realized, delegates to the 2012 Congress of the European Lubricants Industry were told.

The U.S. market is on the cusp of some very strong growth, Milind Phadke of Kline & Co. told delegates, adding that many factors are coming into play to make rerefining a very attractive industry for both small and large companies. Increasingly, some big oil companies and private equity firms have become interested in rerefining, Phadke said. And thats good news, because they have the money to help the industry grow.

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According to the 2012 LubesnGreases Guide to Global Base Oil Refining, rerefining capacity in the United States is 11,550 barrels per day, while European capacity is 18,120 barrels per day.

Phadke cautioned, however, that before strong growth is realized two important issues had to be addressed. Rerefiners must assure a steady and reliable supply of used oil, and the industry must broaden the acceptance of rerefined products by North American consumers.

Phadke provided an overview of U.S. rerefining at the UEIL meeting last month, while Fabio Dalla Giovanna, technology director at Viscolube Srl, and Detlev Bruhnke, a member of AVISTA Oil AGs management board, presented their companies projects in Tampa, Fla., and Peachtree City, Ga., respectively. Christian Hartmann, chief executive officer of Puralube, spoke to the global market.

While the U.S. rerefining industry is far more advanced than the rest of the world, it lags behind Europe in terms of regulation, collection infrastructure and capacity, Phadke said.

Puralube is the only company that has announced plans for a new facility in Europe. By comparison, eight companies-both existing and new players-are either building or planning to build rerefining plants in the United States. The current U.S. capacity could double by 2017 if all of the projects come to fruition, Phadke said.

NexLube Tampa is building a rerefinery and blending plant on land leased from Tampa Port Authority and Hillsboro County, Fla., using Revivoil technology, developed by Viscolube and Axens of France. Viscolubes Dalla Giovanna called NexLube Tampa an important American player with the will to become an important rerefiner in the United States.

When completed, it will process 24 million gallons of used oil annually, and produce about 20 million gallons per year of Group II base oil in three cuts: SN85, N150 and 330 plus. After on-site blending, NexLube estimates it will produce about 24 million gallons per year of various grades of motor oil, hydraulic fluid, transmission fluid and other specialty products, including white oils.

Earlier this year, Avista acquired a 50 percent stake in Universal Environmental Services LLC in Peachtree City, Ga., to partner in construction of a base oil plant. When completed, the plant will process 30 million gallons of waste oil per year. The plant will use Avistas Enhanced Selective Refining technology.

Several characteristics define U.S. rerefining, according to Phadke. It is really a local or regional industry. National supply-demand balance of used oil is, strictly speaking, not relevant. Rerefiners in the Midwest are not likely to have a basestock supply from the Northeast. That means that the supply chain providing used oil to rerefiners will also be regional.

He noted there is a gold rush going on in the United States right now, where rerefiners are scrambling to identify and secure the best locations. Once a rerefining plant is set up, and used oil volumes are tied, a newcomer will be hard pressed to acquire feedstock, Phadke explained. One benefit of the gold rush, though, is that operating cost will fall and the standardized practices that evolve will improve the quality of the used oil that is collected.

Broadening the appeal of rerefined lubricants presents the greatest challenge, Phadke said. Commercial fleets provide easy converts to closed loop rerefining once a rerefiner establishes its credentials.

The consumer automotive market will be a harder nut to crack, he said, but he noted Valvolines entrance into the rerefined lubricants business with its NextGen product line is a significant event, because other larger companies may step in based on Valvolines performance. Historically, rerefining has been locally driven, but the economics are beginning to make it more attractive to larger companies, Phadke contended.

If another major brand were to enter the business, it would go a long way in building customer confidence, he said. As far as pricing is concerned, it is beginning to make more and more sense to rerefine used oil rather than dispose of it.

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