They also communicate with OEMs on several levels in multiple ways, and if the OEM is global the liaison is also global. There are multiple points of contact, and additive companies do not interact with OEMs as one company, Agashe adds. Although additive companies have significant interaction with OEMs, there is usually no direct business. There are exceptions – alliances on genuine oil supplies or OEM specification products and in the Mercedes Race 2012 formulation instituted in 2008 as a competitive development process.

In most cases, lubricant companies are the primary commercial targets of additive companies, Agashe said. Although it varies, business development generally includes promoting additive packages on the basis of various technical and commercial benefits, the localization of products, cosponsoring formulation development and testing data to support marketing claims. In the industrial market it is more diffuse, but projects include increasing durability/efficiency, providing biodegradable and food grade lubricants, reformulation to permit API Group II and III rerefined base stocks and reformulation to reduce bright stock usage.

Despite their sphere of influence, additive companies are, for the most part, not interested in participating in the finished lubricants business, Agashe claimed. They do not want to compete with customers and do not possess the distribution capability or brand building capacity – but in some cases niche products such as PAO are blended by additive companies for lubricant companies.

The base oils and finished lubricants landscape is changing rapidly, she said, but emerging base stock suppliers provide additional revenue opportunities – restrictions on Group III viscosity grade read-across and base oil interchange make it important to focus on market/formulation development. According to Agashe, Group III marketers partially or fully sponsor formulation development and testing, which allows a quick ramp-up in sales once a plant is commissioned. Beside this, there is support for new areas, including low viscosity SAE 5W-20 [heavy-duty motor oil], as they likely require Group III basestock.

Globally, the lubricant additive industry has morphed into two categories – component suppliers and package blenders. Component suppliers compete in specific technology/chemistry niches in contrast to package blenders that have in-depth knowledge of OEM needs, providing the ability to make compromises that balance cost and performance. However, that demands big sales volumes to justify a return on the significant investment. Although there is talk of consolidation, Agashe says there is little scope for mergers and acquisitions unless a package blender needs a component supplier to strengthen internal supply.