Industrial Lubes to Take Off in Smaller Markets

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Global general industrial oils and grease demand reached nearly 6.5 million metric tons in 2014, led by Asia-Pacific, while the highest demand growth through 2019 is expected in South America, Africa and the Middle East, according to consultancy Kline & Co.

Regions

In North America, Kline noted a shift towards Group II base oils in formulating industrial oils and grease. This is because of increasing availability as well as increasing competitiveness of Group II base oil compared to Group I oils, Kunal Mahajan, project manager, energy, for Kline & Co., said during a webinar Sept. 23. Another reason is the products formulated using Group II base oils have better performance, which results in longer service life and extended oil drainage intervals. Therefore, end users are adopting these products more and more.

The key markets in Asia include China, India, Japan and South Korea, considered among the biggest economies in the region.

In Asia, the demand is mainly driven by economic growth, he said. Because of this, income levels will rise and peoples habits and expectations will change. Because of growing income, consumers are demanding better quality food which has higher protein content, he said. As result of that, consumption of meat and poultry products has increased. Demand for processed food items is also increasing, leading to growth in the food processing industry. All of these factors lead to growth in consumption of lubricants in the regions food and beverage industry, he noted.

Key markets in Europe include DACH (Germany, Austria and Switzerland), Russia and Turkey. Growth in demand for general industrial oils and grease is still expected in Europe but threats remain from the Eurozone crisis and economic sanctions placed on Russia.

Economies like Russias are mainly dependent on the oil and gas industry, he said. But as oil prices have plummeted, so the economy of Russia is expected to take a hit that may dampen its growth prospects in Europe.

In the rest of the world, key markets include Brazil, Saudi Arabia and South Africa, where demand volume is smaller but growth in demand is expected to be driven by infrastructure-related industries like cement and primary metals manufacturing.

Products

Hydraulic fluid accounted for more than 50 percent of global demand in 2014, followed by gear oil, turbine and circulating oil, compressor oil, refrigeration oil and greases. This is because hydraulic fluids are consumed in large quantities in various manufacturing as well as mining industries, Mahajan said.

Turbine and circulating oil are forecast to have the fastest growth at a little more than 1 percent per year to 2019, driven by increasing power generation capacity. They are followed closely by refrigeration oils, fueled mainly by growth in the food and beverage, and pharmaceutical industries.

Trailing in growth are gear oil, hydraulic fluid, grease and compressor oil.

Mineral-based vs. Synthetic

Mineral-based products are the most popular products across all categories. However, the consumption of synthetics is growing, Mahajan said. This is because of extreme operating conditions, OEM recommendations, and the realization on the part of end users of the benefits of using synthetic products.

He cited gear oil consumption in wind power as one category where synthetics are becoming more popular. In the wind power industry, the wind velocity keeps on changing, many times during course of the day, Mahajan explained. This puts a lot of stress on the gearboxes used to drive a gear-driven turbine. Because of that, the gear oil that is used for proper functioning of gearboxes comes under a lot of stress. And to avoid the failure of gear oil or gear boxes, the operators generally prefer synthetic products in this industry.

Synthetic oils are especially popular in the case of compressor and refrigeration oils, he noted. In the case of compressor oils, he said, OEMs have been promoting their usage by providing extended warranty periods. Many customers, even after the warranty period has expired, continue to use the synthetic products as they have experienced the benefit of using those products, Mahajan said. Because of that, the consumption of synthetic compressor oils has been increasing.

He noted that synthetic products are more popular in the case of developing economies – essentially Europe and North America – compared to Asia Pacific, South America or the rest of the world. The reason for this is the price of synthetic products is quite high, he added.

Brands

Globally, Shell and Exxon Mobil – which, combined, account for more than 25 percent of industrial oils and grease demand in 2014 – are the leading industrial oil suppliers, with each having a significant presence in all regions.

They are followed by Chevron, BP, Sinopec, Petrochina, Lukoil, Total and Petrobras. He noted that some of the top suppliers, such as Sinopec and Petrochina, only have presence in one specific region such as Asia-Pacific. Other suppliers accounted for more than 50 percent of the global demand.

The study is titled, General Industrial Oils and Grease: Global Market Analysis and Opportunities.

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