Conflict Impacts Ukraines Lube Demand


Ukraines lubricant consumption nose-dived up to 30 percent since the armed conflict in the eastern part of the country began earlier last year, sources knowledgeable about the market told Lube Report.

Ukraine is normally among the top 10 lubricant consumers in Europe, and estimates about the size of its lubricants market vary widely. Before the outbreak of hostilities, the country consumed approximately 350,000 to 400,000 metric tons annually. German lube maker Fuchs Petrolub pegged Ukraines total lubricant market at 350,000 tons in 2013.

According to estimates by the main market players, Ukrainian lubricant demand had shrunk by as much as 120,000 tons, an industry insider told Lube Report last week. It may be explained by general economic recession in the country, which seriously affected lube consumption in the industrial and automotive sectors, he commented, on condition of anonymity.

In 2014, Ukrainian new car sales plunged around 80 percent, to their lowest since 2001, according to Ukrautoprom, a motor vehicle manufacturing association. Many other industry segments have been affected, such as construction, machine building, and metallurgy and mining. A large number of the countrys metallurgical complexes and mines are located either in close vicinity to or in the temporarily occupied territories [in the Eastern Ukraine], the source said.

Ukraines lubricant consumption has been impacted by the extremely poor economic situation in the country. In the past year, the national currency, the hrivnya, lost more than two thirds of its value against the United States dollar. In 2014, Ukraines gross domestic product shrank 7 percent, inflation spiked to 25 percent and many economists expect inflation to remain in double digits this year, too.

Roman Lyubin, owner of independent lube maker Grom-Ex in Kharkov, also confirmed that Ukrainian lubricant demand has been dramatically reduced. The annexation of Crimea [by Russia] and the ongoing armed operations in the countrys eastern part caused the demand to falter, he said.

The eastern part of Ukraine is the countrys largest industrial hub, with many metallurgical, mining and heavy machinery manufacturing complexes located in the region. Agrinol, Ukraines biggest lubricant producer, is located on the Black Sea port city of Berdyansk, not far from the war zone. Around 70 to 80 percent of the lubricant demand in Donbas has dropped as result of the hostilities and warring, Julia Govorova, foreign trade department manager at the Agrinol group of companies, told Lube Report. Considering that this region makes up the lion share of the Ukraines economy, it is no wonder that the demand dropped significantly countrywide, she added.

All commentators agreed that business is difficult during these times because of safety concerns, disruptions in supply chains and difficulty reaching customers. Another challenge is corruption, which has long been cited as a problem in Ukraine.

The war between the Ukrainian regular army and the pro-Russian forces erupted in the eastern part of the country in April last year.

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