Russias combined base oil and lubricants production grew just 2 percent in 2015 compared to the year before, as the country entered into its second consecutive year of economic slowdown and low consumer demand, according to research and consulting firm EY Moscow, part of Ernst & Young Global.
Last year, the countrys combined base oil and lubricants production amounted to around 3 million metric tons, said Dmitry Dzyuba, assistant director of EYs Moscow-based oil and gas center. That was a good result, he added, considering the fact that in 2014, Russias sales of finished lubricants had slumped 4 percent versus the year before.
Get alerts when new Sustainability Blog articles are available.
In 2015 Lukoil held 45 percent of Russias total lubricant production, followed by Rosneft and Gazprom that held 20 and 14 percent, respectively, Dzyuba told Global Business Clubs CIS Base Oils and Lubricants conference in Moscow last week. The rest, or 21 percent, [came from] other producers.
Roughly half of the Russian finished lubricants market is represented by automotive oils, he elaborated. One half of the automobiles sold in Russia are foreign branded, which drives growth of the premium product segment, and we expect more synthetic oils to be marketed in the country in the following years.
Viewed by product type, industrial oils account for the largest share of domestic finished lubricants production at 21 percent, followed by motor oils at 17 percent, and then hydraulic, transformer and compressor oils, each contributing 2 percent of the total output, EY estimated. However, some 54 percent of the lubricants produced in Russia are low-quality multipurpose lubricants, plasticizer oils, fillers and carriers, Dzyuba said.
Just 1 percent of the finished lubricants made are transmission oils, and an equal share is process oils, he said, citing EYs own market surveys as well as data sources such as Rosstat, the Federal State Statistics Service, Autostat, Lukoil and InfoTek.
Speaking in February to the ICIS World Base Oils & Lubricants Conference in London, InfoTeks Tamara Kandelaki put the size of the Russian market in 2015 at closer to 2.4 million metric tons, of which 42 percent was base oil, 28 percent was automotive products, and 30 percent was industrial lubricants. EYs higher production figure is due to its use of Russian state statistics that count the low-quality multipurpose lubes, plasticizer oils, fillers and carriers mentioned above, which InfoTek did not include in its data.
The consumption of industrial oils is related to the countrys economic growth, and we expect the industrial oil demand to capture around 1.5 to 2 percent growth annually by 2020, Dzyuba said last week. In light of the economic slowdown, widely accepted to last until 2018, one positive factor that could drive the growth is the state-sponsored import substitution program. This program encourages the adoption of Russian-made materials – including lubricants – in place of imports wherever possible.
Despite this policy, foreign brands continued to hold the lions share of the motor oil volumes supplied last year. EY found that imported foreign brands held a 39 percent share of all motor oils marketed in Russia in 2015, while foreign brands produced on Russian soil represented another 20 percent. That left native brands to carve up the remaining 41 percent of the motor oil market. EY does not foresee much change in this supply scene through 2025.
The top six most-attractive motor oil brands in Russia are Mobil, Castrol, Shell, LiquiMoly, Motul and Lukoil, Dzyuba added.
In terms of trading partners, Finland shipped the largest volumes of motor oils to Russia in 2015, with 25 percent of the total imports. It was followed by Germany with 18 percent of the countrys total imports, and then by South Korea, Belgium and Belarus (11, 9 and 5 percent, respectively).
From 2011 to 2014, Russias import-export balance favored the outgoing side, hovering around 600,000 tons of base oil and finished lube imports and 1.2 million tons of exports each year. The country primarily exports base oils, while it primarily imports premium-quality finished lubricants, Dzyuba pointed out. After ticking up to 1.3 million tons in 2013, though, exports fell back to 1.1 million tons in 2014.
According to EY, Turkey was the largest destination for Russias base oil and lubricant exports, and claimed a 13 percent share in 2014. It was followed by China and Ukraine, both with 11 percent, and Kazakhstan and Belgium each received 8 percent of the exports. The rest, or 49 percent, went to other diverse destinations.