Vertex to Enter Finished Lubes Market


Rerefiner Vertex Energy plans to launch a finished lubricants product line, the companys top executive said in a letter to shareholders.

Given our expertise in collecting used motor oil and our significant base oil processing capabilities, the next logical step for Vertex Energy is to produce our own line of finished lubes that can be sold into the market, Chairman and CEO Ben Cowart said in the letter, posted to the Securities and Exchange Commission yesterday. By doing so, we believe that we can improve margins as we will be able to capture the spread between base oil pricing and finished lube pricing.

Improved quality of rerefined base oil and the scale of rerefiners now open the door to in-house production of finished lubes by rerefiners, Cowart said in a presentation at the ICIS Pan American Base Oils and Lubricants Conference on Dec. 4 in Jersey City, New Jersey. He added that vertical integration – all the way from collection through marketing of finished lubricants – can dampen the volatility caused in recent years by price swings for products such as base oil, vacuum gas oil and crude oil.

Entering the finished lubricants products market would put Vertex in the ranks of other rerefiners who blend their own finished lubricants, such as Clean Harbors Kleen Performance Products, with its EcoPower and Performance Plus brand lubricant lines; and Universal Lubricants, with its EcoUltra line.

In the letter, Cowart also spoke to continued consolidation in the used oil collection sector.

It is our belief that the current market conditions will result in a consolidation in the used oil collection space similar to the consolidations that occurred in the rerefining sector over the past two years, he stated. We intend to be a participant in this anticipated collection consolidation as we seek to grow our own collected volumes for further processing at our various facilities. We believe that this consolidation, combined with our shift away from pay-for-oil and the continued shrinking of alternative markets for used oil, will have the overall impact of reducing feedstock costs in the future.

In 2014, Houston-based Vertex acquired Heartland Group Holdings – owner of a used oil collection network and a 1,500 barrels per day Group II rerefinery in Columbus, Ohio.

In March 2014, Vertex announced it agreed to buy Omega Holding Co.s rerefining assets, including a used oil collection network, two facilities in Louisiana, and Cam2s lube oil blending plant in California. In May last year, Vertex said it began leasing the Bango Oil base oil rerefinery in Fallon, Nevada. The rerefinery has 1,400 b/d Group II capacity.

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