The bottom line is that Turkish market has been oversupplied by a total of 3.5 million tons of base oil and lubes between 2009 and 2013. These oversupplied products likely went to the black market and were consumed illegally as diesel fuel. This oversupply seems to be in a down trend in 2014.

Finished Lubricants

The country has a large number of lubricant blenders, Ilter noted. Although the number of blenders increased to 311 at the end of 2011, it started to decrease during the last two years as a result of the government crackdown on base oil smugglers and illegal sale of diesel fuel. As of December 2012 their number was 302, he said. By December 2013, it had dropped to 255.

Petder found that the total nameplate blending capacity of these licensed lube makers is about 4.5 million tons per year, although the country’s annual finished lubricants consumption is less than 10 percent of that amount.

In 2013 Turkish automotive lubricants sales accounted for 51 percent of the total finished lube sales, at 210,000 tons, Ilter said. Industrial lubricants accounted for 38 percent, or 157,000 tons. Marine lubricants and greases accounted for around 6 percent each, or 24,000 and 25,000 tons respectively.

Although the countrys automotive lubricant sales decreased 3 percent in 2013, industrial oil sales increased 9 percent, compared to 2012. This fall in automotive lubricant sales is explained by the longer drain intervals and introduction of high quality lubricants. On the other hand, the rise in industrial oil sales is a result of big investments in hydroelectric dams and a fast-growing construction sector, Ilter said.

In 2013 on the automotive side, engine oil sales constituted an 83 percent share of the total automotive lubes sales or 176,000 tons, while gear and transmission oils accounted for 7 percent, or 34,000 tons, according to Petder. Of the total engine oil consumption, Turkey’s commercial vehicles consumed 124,000 tons, passenger cars consumed 49,000 tons, and motorcycles consumed 3,000 tons.

Last year in the industrial oils segment, hydraulic oils led with a 69 percent share, followed by process oils (29 percent) and transformer oils (15 percent). The rest goes to metalworking fluids (9 percent), gear oils (8 percent) and others (27 percent).

In 2013, Turkey’s finished lubricant imports amounted to almost 114,500 tons, up from 95,000 tons the year before. The country has seen a significant increase in finished lube exports. Last year the exports amounted to 174,000 tons, up from 135,000 tons in 2012.

Base oil

In 2011 Turkey imported over 1 million tons of base oils, Petder found, quoting Turkish Statistical Institute data. The reason why Turkey imports base oils in such high volume, given the countrys relatively small finished lubricants demand, lies in the import tax difference between the base oil products and other petrochemicals such as gas oil or other fuels. Here comes the illicit practice done by many market players of mixing base oil with diesel and selling it as fuel, Ilter said.

Turkeys base oil imports increased considerably from about 600,000 tons to more than 1 million tons between 2009 and 2011. Since then the government has tried to regulate the problem by cracking down on the numerous base oil consumers that dont have licensed blending facilities to produce lubricants, banning imported shipments and closing tank storage.

Since August 2012, as a result of the state enforcing regulations, Turkeys base oil oversupply dropped by an average rate of 35,000 tons per month by December 2013, and last year base oil imports totaled 744,000 tons, according to Petder. But it [oversupply] has not ended. Towards the end of last year, due to the new supply regulations related to the non-fuel products, [base oil oversupply] slightly increased and again dropped rapidly in early 2014, Ilter said.

The bottom line is that the Turkish market has been oversupplied by up to 3.5 million tons of base oil and lubes between 2009 and 2013. These products are used in the black market and consumed illegally as diesel fuel, he contended. However, the oversupplied amount seems to be in a downward trend recently.

Turkey has one base oil plant operated by oil major Tupras. With 400,000 tons per year nameplate capacity, the API Group I base oil plant is located in Izmir, the countrys second biggest city. The association said that the refinery produced 154,000 tons of base oil in 2013, much less than in preceding years – 380,000 tons in 2011 and 266,000 tons in 2012.

Petder expects the Turkish lubes market to grow in the future, driven by the countrys growing economy. Despite the problems, the eight million unit vehicle park and growing manufacturing and construction sector will drive the countrys lubricant market. It is promising especially because it is a vehicle- and industrial lubes-dominated market.

The country’s lubricant market is extremely sensitive to taxes due to the tax rate differences between fuel and non-fuel products, Ilter said.

The future looks brighter if the government succeeds in rooting out smugglers that use base oil as diesel fuel, and if it enforces regulations against unfair competition by using a new license regime and new improved standards. We hope that the lubricants industry – which has been undervalued because of illegal and illicit activities – after this legislation will find its well- deserved place in Turkey, as it is everywhere in the developed world, he concluded.