The global naphthenic market is poised for growth, she said, thanks to five key factors. First, industrial lubricant demand is growing fast in emerging markets. Serra-Holm pointed to Kline data showing industrial lube demand growing over 5 percent per year in India, nearly that rate in China, 4 percent per year in Indonesia, and about 3.5 percent per year in Brazil.

A second factor is increased pale oil use in Asia, thanks to the expanding middle class and growth in consumer markets that lead to increased process oil demand. In addition, naphthenics provide the solvency and viscosity that local Asian API Group II and III paraffinics lack. Investments in infrastructure translate into growing demand for transformer oils, and countries producing tires for export open up new markets for naphthenics.

The tire market itself is the third factor, Serra-Holm continued. Europes ban on aromatic extracts in tires is spreading worldwide at the same time the global car park is increasing. Total global tire demand is expected to grow by over half a million tons in the coming decade, she noted, doubling the potential tire market for naphthenics.

Electrical oil demand growth is the fourth key factor driving pale oil growth. Emerging markets with booming populations and strong GDP growth need electricity. And even in the mature markets of the United States and Europe, electrical oils are in demand for replacement of existing investments. For example, said Serra-Holm, 70 percent of all U.S. transformers are older than 25 years.

Finally, the shift in the paraffinic base oil pool toward new Group II and III capacity, which lack solvency and viscosity, will create important opportunities for pale oils. Blends of Groups II or III and naphthenics cover many Group I applications, said Serra-Holm. There is great potential with blends.

But pale oils growth potential can be materialized only if new naphthenic capacity is installed in the mid-term, she said. The market needs to trust in reliable supply in order to reformulate with naphthenics.

Two naphthenic capacity increases have been announced, she continued. A production increase of 100,000 t/y is planned in Serbia, and Nynas will increase its new Harburg, Germany, plants current 150,000 t/y capacity by another 200,000 t/y by 2016. This will total 300,000 t/y of new capacity by 2016, equal to an 8 percent uptick in global capacity.

Nynas predicts the potential naphthenic market will climb to 5.4 million tons by 2016, keeping a step ahead of projected global capacity of 4 million tons.