Small Gains Seen for Lubes in 2014


LONDON – Initial estimates by lubricants manufacturer Fuchs Petrolub have put global lubricants demand at 35.4 million metric tons in 2014.

While thats a small step above 35.3 million tons in 2013 and 35.0 million in 2012, the companys Apu Gosalia reports the worlds need for lubricants has barely budged from what it was back in 2000, even as key user industries have expanded.

At the recent ICIS World Base Oils & Lubricants Conference, Gosalia, head of global competitive intelligence and chief sustainability officer of the German company, pointed out that global car production was up 4 percent for the year 2014, chemicals production was up 2.8 percent, steel production gained 1.2 percent, and GDP rose 3.3 percent on a global basis.

Did all this economic activity spur a greater need for lubricants? Alas no. Lubricant volumes in 2014 grew only 0.5 percent above 2013, and have not recovered yet to their peak of 2007, before the worldwide economic crisis, Gosalia reported. (Fuchss figures exclude marine oils, but other sources put yearly demand for marine lubricants at 2.5 million to 2.7 million tons worldwide.)

Looking back even further, global lubricants demand in 2000 was around 36.4 million tons – a million tons higher than it is now, Gosalia emphasized in his Feb. 19 presentation here. Meanwhile, the industry has seen tectonic shifts in geographic distribution.

Asia-Pacific and the rest of the world accounted for only 39 percent of the global lubricants market in 2000, while in 2014 it was 53 percent, he said. North America, which held 34 percent of the market in 2000, now is just 28 percent. And Western and Eastern Europe together have about 19 percent, versus 27 percent back then.

By region, demand growth varied widely in 2014. North America saw demand rise 1.4 percent versus 2013, while Latin American demand fell back 1.4 percent. Demand in Eastern Europe in 2014 dropped off 3.8 percent, and in Western Europe was down 1 percent.

Meanwhile, lubricants demand in Asia-Pacific, the main engine of growth for a decade, rose 1.4 percent in 2014 versus the year before, Gosalia observed.

The strongest gains came in the Middle East, up 4 percent in 2014 from the year before. The Middle East is a growth region these days, said Gosalia, due to its increasing gas production, chemicals processing and steel industries.

Going on to rank the worlds leading lubricant-consuming countries in 2014, Fuchs puts China at the top of the list, thanks to a decade of rapid economic growth and its huge population. Second is the United States, then India, Russia and Japan. Filling out the Top 10 in 2014 were Brazil, Germany, Korea, Iran and Indonesia.

The two countries at the top of the heap couldnt be more dissimilar: At number two, the United States has the highest per-capita lubricants consumption in the world. But China, with a per-capita consumption nearer to 5 kilograms per person, now uses more lubricants overall. We dont expect China will ever reach U.S. levels of consumption, but it may get to 6, 7 or 8 kilograms per person – and it has a billion people.

These signs all point to continuing volume growth that will be concentrated in developing countries, while for the mature countries of Europe, Asia and North America, growth is going to be on the quality side.

Europe already is deep into this shift towards higher-quality, longer-life products, and the effect on its consumption has been dramatic. The continents appetite for lubes has fallen 30 percent since 2000, Fuchs calculates, and sank to 6.7 million tons in 2014.

Gosalia sketched some of Europes highs and lows for 2014: Germany, which is back up to around 95 percent of pre-crisis levels, came out better than most because of its manufacturing and exports. But the U.K. is down 25 percent over that time, sorry to say. Demand in France is not much better, and is estimated to be not yet 78 percent of pre-crisis consumption.

In Eastern Europe, we believe the Russian lubricants market fell 2 or 3 percent in 2014 versus 2013, and Ukraine probably contracted by [a] double-digit rate, said Gosalia. Yet Poland has a strong industrial base, where the chemicals sector is the second-largest contributor to GDP growth.

Still ahead looms the question of what 2015 will bring. Based on forecasts by the International Monetary Fund and others, Fuchs believes that Europes lubricants market can expect more of the same – only perhaps a bit more gently. Europes lube market will shrink another 1 percent this year, but remember – it was down 2.5 percent in 2014 versus 2013, Gosalia added consolingly.

What are lubricant manufacturers to make of this outlook? he mused. How do we respond to the changing supply situation? By having flexibility, a diversified portfolio of customers, and a well-diversified portfolio of sectors, regions and products, he suggested.

On the plus side of the scale, there is good opportunity now to improve product portfolios and capture more value. API Group II base oil is now widely available everywhere, and reasonably priced. But theres still good demand for Group I, and with lower crude oil costs, we may see that Group I refineries in the Middle East are able to continue operating at a lower sustainable cost.

Everyone says there is no growth in lubricants, on a quantity basis – but on a quality basis, there is demand, Gosalia asserted. And to me, quality means growth.

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