Bulgarian lubes marketer Prista Oil operates in Eastern, Central and Southeastern Europe, as well as in Central Asia.

Ukraine

Base oil production ceased in Ukraine a few years ago, Todorov claimed, although Ukrtatnafta has an API Group I plant in Kremenchuk with 5,800 barrels per day of nameplate capacity.

The countrys predominant lubricant volumes only meet the GOST Soviet specification, an obsolete standard, he said.

Aside from the current political crisis, Ukraines economic structure faces many problems which hamper lubricant marketers operations. Prista found the country has a limited number of developed industries – agriculture, metallurgy and the mining sector. It has a high dependency on trade with Russia, faces a lack of investments for technology modernization, and foreign investors are challenged by the complex legislation and red tape, Todorov said.

Other obstacles include fast depreciation of the local hryvnia currency, value-added tax refund problems for exporters and a partly reformed banking sector. Ukraines renewed passenger car and heavy duty fleets are driving the demand for higher specification lubricants and specialties, according to Todorov. Annual passenger car sales slumped from 610,000 units in 2008 to 175,000 units in 2009, rebounding only to 237,000 units in 2012.

Ukraine could be a potential driver for growth in Europe. Unfortunately, the short- and mid-term economic prospects are not positive. The deteriorated relations with Russia may have a severe negative impact on the economy, and we expect a long recovery period despite the aid promised by the United States, European Union and the [International Monetary Fund], Todorov said.

Turkey

Turkey is the largest lubricants market in the region with consumption that ranged between 420,000 and 500,000 t/y during the last few years, according to Prista.

Turkey has 301 facilities that produce lubricants, with a total production capacity of over 5.1 million tons in 2012. This overcapacity is pressurizing the margins and supply on the market, Todorov contended. The Turkish tax system is used by some small producers to acquire an additional marketing advantage, which hampers the operation of the regular lubricant market players. He emphasized that the long tradition of the government rubber stamping lubricant production and base oil import licenses limits growth. Such uncertain legal framework makes it difficult for the lube marketers to do business.

Turkeys economic growth was negatively impacted by the global economic downturn and later by the political turmoil that arose over the last couple of years, according to Todorov. He referred to the anti-governmental protests that began in May 2013. The foreign investors appetite for growth was reduced by the political and economic instability. Depreciation of the Turkish lira and extended payment terms are also limiting the growth of the lubricant marketers business development.

Another important negative factor that led the Turkish economy to stagnate is the considerable role of public sector projects, a smaller number of capital developmental projects and the lack of liquidity in the market.

Over the last few years Turkey has shown strong results in passenger car sales. The peak year was 2011 when almost 600,000 units were sold, almost double compared to 2009, Todorov said. In 2012 passenger car sales reached 556,000 in Turkey.

Romania

The Romanian lubricant market amounted to approximately 90,000 t/y in 2012, according to Prista. Well-developed metallurgical and automotive industries are among the main drivers of the countrys lubricant consumption. The demand is almost constant within the last five years. Romania is a typical example of a market in transition from emerging to mature, and it has low expectations for further growth, Todorov said.

Prista found that during the last few years, the Romanian economy contracted, and the country implemented severe austerity measures to achieve financial stability. There is a lack of liquidity in the market, and the public projects play a considerable role in the GDP structure. The European Unions financial crisis impacts negatively on the countrys economy, Todorov said.

As in the Ukraine, Romanian passenger car sales slumped drastically since the onset of the global economic downturn. In 2008, the countrys passenger car sales amounted to 285,000 units, and shrunk to only 66,000 units in 2012, Todorov said.

The economies of Ukraine, Turkey and Romania all have their own woes, and lubricant marketers from the region have to look elsewhere for growth opportunities, he said. The main destinations for them should be Asia, the Middle East and Africa, according to Prista.

The growing economies of Asia and Middle East are considered a new wave of emerging markets. Their increasing lubricant demand cannot be satisfied by domestic supply, especially demand for high-tier products and specialties, Todorov said.

Despite the fact that Africa consumed only 1.3 million t/y in 2012, and holds a 5 percent share of the global lubricant demand, its finished lubricant consumption is expected to have an annual growth rate of 3 to up to 5 percent, according to Todorov. It is due to the increased investments in production, infrastructure and fleets in the region, he concluded.