Global lubricants demand reached 39 million tons in 2012, a growth of almost 1 percent over 2011. Passenger car and heavy-duty motor oils accounted for the biggest portion, which was over 43 percent of the total global lubricants demand, Geeta Agashe, Klines senior vice-president for management, told ACIs European and Base Oils conference held in Budapest in September. Process oils held the second biggest position of the global demand with a 15 percent share. The rest goes to other finished lubricant categories.

Geographically, the Asia-Pacific region became the epicenter of the global lubricants industry, said Agashe. The region last year accounted for over 43 percent of the total global lubricants demand. Last year North America consumed about 25 percent of all lubricants, followed by Europe with 17 percent. Trailing were Africa and the Middle East (8 percent) and South America (7 percent).

From a volume standpoint, Europe is not such a big consumer, according to Kline. However, from a value standpoint, [Europes] share is much bigger because it uses the largest volume [in the world] of synthetic and synthetic-blended lubricants, Agashe pointed out. The volume of lubricants consumed in North America and Europe is definitely shrinking, and it was an ongoing trend over the last few years. On the contrary, she said, the regions of Asia-Pacific, Middle East, Africa and South America are showing growth.

In Europe, the major lubricants markets are Russia, Germany, United Kingdom, France, Italy, as well as the Iberian and Benelux countries. Together, these top seven markets account for 80 percent of lubricant consumption in Europe and over 90 percent of industrial and automotive production [in Europe], Agashe said.

Key indicators for the high lubricant demand in these countries compared to the rest of the European states are their gross domestic production rates, as well as their high levels of auto and steel production. Because of the economic slowdown in Europe, almost all of these countries real GDP growth rate either declined or just remained flat from 2008 to 2012, except for Russia, whose real GDP grew by 1.8 percent during those four years, Agashe said.

These European economies, except Russia, face the likelihood of sluggish GDP growth through 2020, Agashe said, citing statistical data from the Economist Intelligence Unit. In 2012, the biggest European auto manufacturer was Germany. That year the country produced 5.6 million motor vehicles, followed by Russia with 2.2 million vehicles, Agashe said. Germany and Russia are also the biggest steel producers. In 2012, the former produced 42.6 million tons of steel and the latter produced 70.6 million tons.

Hence, Russia and Germany lead overall lubricants consumption by a wide margin due to their large vehicle population and strong manufacturing base. Both countries lube demand is expected to grow less than 1 percent annually by 2021, unlike the rest of the group, which is expected to show negative trends in lubricants demand according to Kline.

Last year Russia consumed almost 1.7 million tons of finished lubricants, followed by Germany with around 1.2 million tons of lubes consumed. In 2012, U.K. and France consumed around 700,000 and 600,000 tons respectively, followed by Italy (500,000 tons), Iberia (420,000 tons) and Benelux countries (280,000 tons).

Germany is the largest European market for synthetic and semi-synthetic lubricants, and the high penetration of synthetics extends the average consumers drain interval to up to 15,000 kilometers, or one oil change annually. This makes Europe a declining market even without other economic hurdles, Agashe noted. The slate of lubricants consumed in Germany is very different than that which is consumed in Russia. In Germany, for example, one cannot sell lubricants as full synthetic unless polyalphaolefin or API Group IV was used in the lubes formulation. In other countries, lubes made of Group II or Group III base oil are sold as synthetic and semi-synthetic.

While all other countries are below the 2007 high-water mark, Germany is the closest to a full recovery, according to Agashe. We analyzed that none of the rest of the countries has come back to the 2007 level. Germany is still not there yet completely because it misses only 1 percent to its 2007 peak lubricant volume consumption, she said, adding that there is no organic growth coming out of these lubricants markets and if a company wants to grow, it needs to take market share from its competition.