JERSEY CITY, N.J. – Two or three years of slow growth in Brazil may drag down the whole South American lubricant market, resulting in lube demand growth in the region of just over 2 percent per year for the next five years, an industry consultant cautions.
Sergio Rebelo, managing director of Factor de Solucao/Kline Group Latin America, gave an overview of South Americas present and future lubricant markets at the ICIS Pan-American Base Oils & Lubricants Conference here Dec. 6.
South America is a huge continent that includes 13 countries with a total population of 402 million. Brazil, with a population of almost 200 million and 55 percent of the regions gross domestic product, is the largest country and leads economically, but other countries are growing faster, said Rebelo.
From 2009 to 2012, the South American lubricant market grew at an average rate of 4 percent per year, in line with GDP growth, Rebelo said. Brazil by far leads in lubricants, with 2012 lube demand of about 1.3 million tons in 2012, or some 60 percent of the total South American lube market of 2.4 million t/y.
South Americas lube market is heavily automotive. Passenger car motor oils are 20 percent of the total, motorcycle oils are 8 percent, heavy duty engine oils are 30 percent, and other automotive fluids are 7 percent, giving the automotive lubricant sector 70 percent of the total market. Industrial lubricants total 26 percent and greases 4 percent, all by volume.
End user markets are expanding throughout South America, Rebelo continued. The number of vehicles in use increased 7.3 percent per year from 2006 to 2011. Brazils vehicle count alone rose by 10 million vehicles over that five year period. And Brazil added 10 million motorcycles to its vehicle fleet in the past 10 years, bringing the two-wheeler count to 13 million in 2012.
Growing access to credit has played an important role in the region, said Rebelo: No credit, no sales of new cars.
Turning to future projections, Rebelo said the South American lubricant market will grow less than 3 percent per year over the next five years. Brazil will impact the entire region, and it is a drag now, he said. With several more years of slow growth forecast for Brazil, expect the whole South American lube market to grow about 2.2 to 2.5 percent per year.
However, total volume growth is only part of the picture. Quality will improve, especially where the vehicle fleet is being renewed, he pointed out, and synthetics will grow. And Brazilian currency depreciation will impact lube profitability, as imported base stocks are quoted in U.S. dollars.
Focusing further on Brazil, Rebelo noted that lubricant market share is concentrated in eight companies; in order of 2012 market share, they are Petrobras, Ipiranga, Cosan, Shell, Chevron, Petronas, Castrol and Total. Five of the eight have expanded their capacity, including Petrobras, Petronas and Total. Chevron lost market share from 2009 to 2012, but is investing heavily to recover.
But growing profitability is difficult, Rebelo concluded. It will be extremely difficult to grow profitably in Brazil for the next two to three years. Companies must think long-term, as growth opportunities are less obvious.