A recovery in volume demand combined with a continued shift to new, high performance additive products is expected to boost market value, according to Lubricant Additives, a new study from market research firm Freedonia Group.

Demand for additives in automotive applications is expected to rise, though advances will be restrained due to weak growth in vehicles miles traveled, lengthening service intervals and little room to further increase additive concentrations, the company said. This will have the greatest impact on deposit control additives – dispersants and detergents – which are a major component of engine oils and account for the largest share of total lubricant additive demand. As a result, Freedonia believes deposit control additives will grow at a below average rate, despite benefiting from strict requirements for engine cleanliness. Additives such as friction modifiers and antioxidants will see the fastest growth overall.

Key drivers for change will be the industrys response to original equipment manufacturer performance requirements, fuel efficiency concerns and emissions regulations, Freedonia stated.

Freedonia analyst Jason Carnovale said that in terms of OEM and industry specifications, the largest factor impacting additives will be development of the ILSAC GF-6 and American Petroleum Institute PC-11 engine oil standards. ILSAC is the auto industrys International Lubricant Specification and Approval Committee.

We expect each of these to require product innovation from additive companies and in some cases rising treat rates, particularly for dispersants, antioxidants and friction modifiers, Carnovale told Lube Report.

On a federal level, he noted that most of the currently planned automotive and off-highway emissions regulations have already been phased in, though we expect new standards to be developed, such as those proposed this March by the EPA. Stricter emissions standards generally require engine redesign by automotive OEMs, and this is typically associated with rising demands on lubricant performance.

The firm forecasts increases in volume demand will be stronger for additives used in industrial lubricants, projecting a 5.3 percent annual growth rate to $1.5 billion in 2017, compared to 4.1 percent from 2007 to 2012.

Though smaller in volume than the automotive lubricant market, industrial lubricants will exhibit stronger growth in both lubricant production and additive concentrations, the company said. Gear oils, greases, hydraulic fluids, and general oils will exhibit the most rapidly rising additive treat rates in order to meet heightening performance demands, with antiwear and extreme pressure additives experiencing the fastest growth in these markets.

According to Carnovale, Freedonia sees a variety of industrial equipment specifications trending toward higher requirements and a larger percentage of lubricants expected to meet more stringent existing specifications as older equipment is replaced. As a simple example, higher performance hydraulic fluids – which use higher additive concentrations – will continue to gain market share from more basic fluids, he pointed out.

Freedonia is forecasting rebounding industrial activity in several sectors in the U.S. Automotive manufacturing and construction will be particularly strong, but rising manufacturing output of both durable and nondurable goods will drive lubricant demand in a range of industries, Carnovale said.

The company believes use of more environmentally friendly fuels, including renewable fuels, in both automotive and industrial engines will also drive changes in lubricant formulation and additive demand, with varied results. While the expansion of biodiesel in the motor vehicle fuel pool will require additives in diesel engine oils to provide better oxidation and corrosion protection, widening restrictions on sulfur in marine fuel oil may reduce the need for detergents in marine engine lubricants, Freedonia suggested.

Carnovale noted an interesting issue will be future development of the U.S. base oil market, particularly the availability of gas-to-liquid base stocks. If GTL production goes forward in the U.S. in the next several years, this will affect lubricant formulations and therefore the additives industry, he said. We expect that increasing base oil quality in general, accelerated by GTL availability, will have a substantial impact on additives, because higher quality conventional and synthetic oils often require less use of viscosity modifiers and are more resistant to oxidation, among other benefits they offer.

The 212-page study is $4,900. For more information, visit www.freedoniagroup.com