Global Lube Demand Projected as Flat


Global lubricant demand is expected to increase at a compound annual rate of less than 1 percent, to 41 million metric tons by 2021, according to consultancy Kline & Co., with the continued shift to synthetics both suppressing volumetric growth and boosting revenues in some countries.

Kline estimated global finished lubricant demand at 39.6 million tons in 2016, including process and marine oils. The Asia-Pacific region had the most demand, followed by North America and Europe. Motor oils for passenger cars and equipment powered by two- and four-stroke engines took the lead in terms of lubricant demand by application for the first time, ahead of heavy-duty motor oil, followed by process oil.

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George Morvey, industry manager for Klines Energy Practice, noted during a webinar Aug. 31 that in countries such as India, Indonesia and Thailand, new vehicle sales in the consumer and commercial space are growing and forecasted to continue doing so. New vehicle sales mean modern products and lower viscosity grades, so thats a good thing, he said. Meanwhile, a continuing shift to synthetics in the United States and Canada is suppressing volumetric growth, he said, but is boosting revenues and opportunities for suppliers. A continued shift in vehicle preferences in some countries – such as a shift from two- to four-wheelers in India – is also considered promising.

Kline ranked the top 20 global finished lubricants suppliers for 2016, which accounted for about 61 percent of total lubricants supply. Shell remained in the lead for the 11th consecutive year, followed by ExxonMobil, BP, Chevron and Total. The top 10 is rounded out by Sinopec, PetroChina, Idemitsu, Fuchs and JX Holdings.

The United States was the largest country market, followed by China, India, Russia and Japan.

Kline projected that the compound annual growth rate for consumer lubricant demand in the United States will decrease to around 1 percent through 2021, while the growth rate on the commercial side will have a slight uptick. Canadas demand is expected to decline close to 2 percent per year over that time. Mexico is forecast to grow close to 4 percent annually through 2021. Relatively strong growth demand is projected for Brazil, around 6 percent per year, with all three segments forecast to increase through 2021.

Russia is expected to grow close to 3 percent per year out to 2021. Expectations for the United Kingdoms demand are mixed, with about 2 percent growth projected on the commercial side and about 1 percent decline on the consumer side.

More access to better base stocks is proving a factor in all types of country markets. What were seeing is, whether looking at a developed or developing country market, the demand for high performance, low-vis PCMO continues to accelerate, he said. Whats driving that? We are seeing continued expansion and availability of higher quality base stocks, from Group II to Group III+. That just makes it easier for formulators and supplies anywhere to access quality base stocks and improve their product slate.

Original equipment manufacturer technical demand and evolving government regulations remain key factors. That is a significant driver in a shift to lower viscosity grades, especially to synthetics, Morvey said. Government and industry specifications – for improved fuel economy and reduced emissions has a big impact on the industry.

Kline estimated synthetic lubricants penetration at about 20 percent of the total global market in 2016, driven by expanding OEM technical demand. More and more OEMs, especially on the consumer passenger vehicle side, are moving to lower viscosity grades – 0Ws – for factory and service fill, he said. Suppliers are certainly doing their part in terms of marketing and promotional efforts to get product into the market and into those engines.

Europe and North America are the two regions driving synthetic penetration, followed by Asia-Pacific. Despite low or no volumetric growth, regionally or globally, we continue to believe synthetics offer industry participants opportunities for revenue growth whether youre a formulator, an additive supplier or base stock manufacturer, Morvey said. The message here is that synthetics – full or semi-synthetics – is where you want to be globally, regionally and at the country level.

In North America, Kline projects more than 4 percent annual growth from 2016 to 2021 for synthetic lubricants and slightly more than that for semi-synthetics, while conventional is expected to decline close to 2 percent per year.

While Europes demand for synthetic lubes is expected to grow more than 4 percent annually from 2016 to 2021, semi-synthetics are projected to increase at less than a 2 percent clip, and conventional is expected to decline at around 1 percent annually.

While starting from a much smaller base, demand for synthetics and semi-synthetics is expected to grow fastest in Africa and the Middle East, around 10 percent and close to 14 percent, respectively. Conventional lube demand is projected to swell around 2 percent per year in the region.

These country demand projections exclude process oils.

Morvey said companies should watch an emerging trend of government initiatives to encourage local lubricants sourcing, which he noted is evident in countries such as China, Russia and India.

Online retailing of consumer lubricants is another emerging trend, he said, including online retail giant Amazons entry into the $50 billion U.S. do-it-yourself aftermarket auto parts business.

The study, released in August, is titled Global Lubricants: Market Analysis and Assessment.

Related Topics

Business    Finished Lubricants