LONDON – As the most developed lubricant market on its continent, South Africa is surging ahead with demand for higher-quality base stocks and synthetic lubricants, Samer Akram, director of operations for Unichem, reported during a recent industry event.
South Africa boasts a well-established and mature industrial and manufacturing hub that follows European and international standards, Akram told attendees of the ICIS World Base Oils and Lubricants Conference here last month. The future of lubricants is all about the environment, energy efficiency and cost saving, he said.
The quality of lubricants in South Africa is already quite high compared to other major African markets. In one industry study, only 30 percent of samples of packaged lubricants came back off-spec – compared to 84 percent in Nigeria. As the country invests in its infrastructure, the drive toward higher quality lubricants and base oils continues, reported Akram, whose employer is a privately owned specialty synthetic base oils distributor with storage facilities in Durban and Johannesburg.
However, he insisted, we must first start with removing an assumption that there will be a departure from [API] Group I base oils, because thats not going to happen. Alongside healthy Group I demand, a majority of independent blenders in the country have begun blending with Group II base oils. There has also been an increase in demand for Group III oils, as well as PIBs, polyalkylene glycols, esters and other synthetic base stocks, according to Akram.
The South African governments investment in railways, transport and port development is helping to drive growth in synthetics, as is its push toward environmentally friendly lubricants, said Akram. In addition, the countrys mining industry has begun following the Australian model, using higher tech equipment that calls for higher quality lubes.
He also foresees an increase in synthetic and semi-synthetic passenger car motor oil, from 10 percent to 15 percent between 2012 and 2022. The countrys original equipment manufacturers are increasingly advocating the use of synthetic products, he explained, and its middle class is buying more cars and getting re-educated about automotive lubricants.
South Africas overall lubricants market totals about 360,000 metric tons per year and contributes 2 percent of the countrys gross domestic product. Together with Egypt and Nigeria, South Africa consumed more than 60 percent of the total volume of lubricants on the African market last year.
The Lubricants market in South Africa is split roughly 60 percent automotive and 40 percent industrial. Akram expects industrial lubes demand will grow to more than 170,000 metric tons by 2018. According to 2012 figures he presented, 45 percent of the industrial market went to hydraulic fluids, followed by industrial gear oil (20 percent), grease (15 percent), metalworking fluids (7 percent) and other lubricants – including compressor fluids, rolling oils and food grade oils – at 13 percent. Five of the Tier 1 petrochemical companies hold between 80 and 90 percent of the industrial lubricants market, Akram said.
Construction accounted for 37 percent of industrial demand, mining for 23 percent, manufacturing 17 percent, marine 16 percent, railroads 3 percent, agriculture 1 percent and others 3 percent.
Despite the rosy predictions for growth, Akram acknowledged that the South African economy has faced some challenges. The rand has lost 54 percent of its value against dollar since 2011, boosting exports while importers have suffered.
Turning to blenders in the country, for a recent but unspecified year, Akram stated that Engen (a Petronas majority-owned company) holds 25 percent of market. It was followed by Shell (20 percent), BP (16 percent), Total (9 percent), Chevron (8 percent), Fuchs (7 percent) and Sasol (4 percent). Others, ExxonMobil among them, hold 11 percent. He pointed out that Fuchs bought two important independent blenders in 2014 and now holds probably 11 to 12 percent of the market. In January, Chevron announced that it will sell 75 percent of its business units in the country. The pace of these acquisitions and mergers has quickened over the past five years, Akram observed.
South Africa has six refineries, but only one base oil plant, and it produces Group I. Recent decline in capacity has increased the necessity of imports, he explained. With the countrys focus on production and storage of energy and fuels, current infrastructure prevents bulk imports of base stocks. Blenders are instead dependent upon flexitank and isotank deliveries. However, said Akram, import demands are driving renovation of the countrys existing infrastructure.