JOHANNESBURG – The stabilizing global economy will result in lubricant demand remaining flat at around 40 million metric tons by 2020, but demand in Africa should continue growing, Geeta Agashe of Geeta Agashe & Associates LLC said at the ICIS African Base Oils and Lubricant Conference.
Agashe noted that the sub-Saharan Africa region has a lot of growth prospects. She cited, amongst other factors, the population increase forecast for sub-Saharan Africa, which will increase the number of consumers; a growing middle class as economies in the region expand; significant increases in vehicle parcs, including new vehicles; growing mechanization in key industries such as agriculture, construction and mining; and increasing emphasis on infrastructure development like the improvement of roads, highways, airports, public transportation and maritime infrastructure.
Globally, the lubricant industry is not going to grow its appetite for lubricants – it may, at best, enjoy a 1 percent growth overall, keeping in mind that global [gross domestic product] growth is forecast at about 3 percent to 4 percent, Agashe told Lube Report on the sidelines of the conference. But this is not true for sub-Saharan Africa. We are optimistic about the lubricant growth prospects in sub-Saharan Africa for the reasons mentioned earlier.
The countries within sub-Saharan Africa that we are more optimistic about include Kenya, Tanzania, Ethiopia, South Africa, and Nigeria – they all show very good prospects. North and South Sudan will also be good prospects after those countries can focus on the future, she added.
Emmanuel Ekpenyong, head of Lubricants for Honeywell Oil and Gas in Lagos, Nigeria concurred that lubricants demand will be sure to remain positive in Africa until 2020.
This is because Africa has an annual growth rate of about 5 percent and as the economy of the continent grows, factories will be set up, and roads, bridges and buildings will be built. Vehicles and machinery will all require lubrication, said Ekpenyong.
As a result, continued Ekpenyong, demand for lubricants will continue to grow proportionately. Over the next few years, I foresee tremendous growth in East and West Africa – and those markets should be watched for reasonable lubricants demand [growth].
Richard Mugambi, lubricant sales manager in Kenya for Gulf Energy, agreed. From the economic reports by [the International Monetary Fund], World Bank and various regional bodies, there is indication that all the regions within Africa will continue to grow at rates that are above the global average, he said. These growth rates are supported by infrastructural developments, some of which are regional projects that include roads, sea ports and energy. All these factors have an influence on lubricants demand and will continue to grow.
Furthermore, Olaniyi Okedairo, chief operating officer of Ronad Oil and Gas in Lagos, Nigeria, said the expected increased industrialization of the continent and population growth will drive lubricant demands.
Agashe said, however, that the forecast for synthetics demand growth in the African continent is not as positive as it is in other parts of the world.
I dont think this market is ripe for synthetics yet because of the higher prices; customer perceptions that yet exist that make them believe that thicker oil is better; and that the hot, dry, desert conditions and poorly paved roads might not be suitable for the use of synthetics, said Agashe. Most importantly, the vehicle parc in most of sub-Saharan Africa consists of older vehicles, she noted. However, Agashe added, a small niche of innovators and early adopters are already using synthetics in automotive as well as certain industrial applications.
Mugambi echoed that, saying, we are also likely to see growth of the high performance lubricants, which will be driven by increase in disposable incomes and advancement in technology – as we continue getting high end motor vehicles in Africa that will demand synthetic lubricants.