Industrial Oils Shift to Asia

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Led by strong growth in Asia, global demand for general industrial oils is projected to grow from 6.5 million metric tons in 2011 to 7.2 million tons by 2016, according to Kline and Co.

Asia Pacific, with 2.7 million tons demand in 2011, is the worlds leading producer of general industrial oils, largely in part to what Kline calls a massive shift of key manufacturing industries to the region from Europe and North America, the other top regions, said Upshi Gosh, project lead for Klines Energy Practice, during an April 10 webinar. Each of these three top regions held a larger share of general industrial oils demand than the rest of the world combined.

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The study covered hydraulic fluids, industrial gear oils, turbine and circulating fluids, compressor and refrigeration fluids, and other industrial oils, such as heat transfer fluids. Hydraulic fluids accounted for a significantly larger portion than the rest of the categories in the market, accounting for more than half, while the other half was divided almost evenly among the other categories.

With a share of around 30 percent of the global industrial oils and fluids market in 2005, Asia Pacific has been increasing ever since – accounting for around 40 percent of the market in 2011. The significant growth in Asia is mainly influenced by the rapid increase in the chemicals, machinery, transportation equipment, and mining industries in the region. Kline and Co. also found that the regions increase in market share is fueled by the regions increasing populations, growing economies and budding middle classes.

Meanwhile, Kline & Co. found that North Americas growth drivers for the market are expected increases in electrical equipment and energy transmission industries, along with increases in exports to developing countries.

On the other hand, Europes market for industrial oils and fluids is propelled by its focus on power generation. The European Unions target to reduce greenhouse gases up to 20 percent by the year 2020 is driving interest in wind turbines.

In terms of product categories, compressor and refrigeration oils will experience the highest growth rate in terms of percentage of the market, while hydraulic fluids will have the highest volume growth through 2016.

Among the market categories, conventional fluids account for all but 9 percent, while the rest is synthetic. Kline & Co. found that synthetic lubricants have become more prevalent, transitioning from being considered premium products, to more widespread use as a result of increased technical demands and supply.Competition is not only about price, Kline & Co. said, but instead, the focus is on improving product quality, customizing products for high value niches, and developing associated service offerings.

Compressor and refrigeration oils have the highest percentage of synthetic and semi-synthetic oil usage, which accounts for more than 20 percent of total demand in the product category.

Gosh pointed out that across categories, power generation, metals, and mining have the most significant share of end-use industries demand.

While the global recession resulted in turbulence in global automotive production in 2008 and 2009, global crude steel production has risen steadily and significantly in China since 2005. It has remained nearly stagnant in the rest of Asia and stable with a minor drop during the recession years throughout the rest of the world, according to Kline.

Shell and ExxonMobil are the leading general industrial oils suppliers globally, according to Kline. The top five suppliers of general industrial oils account for 45 percent of the global industrial fluids market. According to the Parsippany, N.J.-based consultancy’s study, national oil companies have been increasing their presence in the market, replacing global majors in industries such as machinery and mining, with three national oil companies accounting for 14 percent of total general industrial oils demand.

Klines report is titled, General Industrial Oils and Fluids 2012: Global Market Analysis and Opportunities.