He also predicted that these trends will continue and suggested strategies for independents to succeed during these times.

In an advance copy of his presentation provided to Lube Report, Fuchs contends that the lubricants industry changed more from 1991-2001 than in the previous 30-40 years. First of all, the open market has become larger as nations constituting a full third of global demand opened their industries to competition.

The industry underwent dramatic concentration that reduced the number of lube companies from more than 1,700 in the early 1990s to fewer than 1,400 today, Fuchs estimated. Mega-mergers created companies with ever-greater economies of scale so that the largest 1 percent of producers now account for 60 percent of worldwide production.

There were sharp shifts in the relative consumption of different regions, Fuchs said. Lubricant demand in Asia grew 28.2 percent during the decade. With 27.4 percent of global consumption, Asia surpassed North America as the largest regional market. Central and Eastern Europe, on the other hand, saw their consumption drop 52.4 percent in the wake of the collapse of the Soviet Union.

Finally, technical and environmental requirements for lubricants became more demanding.

Collectively, Fuchs said, these trends have made times tough for lube companies. For all the shifts in regional consumption, global demand has remained flat. In 1991, the world produced an estimated 37.7 million metric tons of lubes. This year, Fuchs projects, it will produce 37.4 million tons.

At the same time, globalization has increased market transparency, making the industry more competitive and squeezing profitability. As petroleum prices soared last year, Fuchs estimated, lubricant producers purchasing bills rose an average of $100 per ton, or 23 percent. Yet producers were only able to pass on 60 percent of those increases to their customers. The result, he said, was a 17 percent cut in profits, or reduction in margins of 8 percentage points.

In the coming decade, Fuchs said, the industry should expect more of the same. While foreseeing a fall-off in the size of mergers, he predicted that consolidation will continue locally and regionally as more companies seek economies of scale required by globalization. Within a decade, he said, the world will have only 800 to 1,000 lubricant companies.

Shifts in the relative size of regional markets should continue. Fuchs predicted that worldwide demand will grow no more than 1.5 percent annually but noted that China and India have tremendous growth potential. Per capita lubricant consumption in those nations is 2.6 and 1.1 kilograms per year, compared to 31.1 kilograms per year in the United States.

Although raw material costs appear to have peaked, Fuchs maintained that consolidation has concentrated base oil production to an extent that has changed the market fundamentally and that will likely keep costs high. For example, ExxonMobil now accounts for one-quarter of base oil production in the United States, he said, and one-third in Europe.

“We have to face this fundamental change in our overall business environment because it is structural and not just cyclical,” he said, adding, “It looks as if times of cheap base oils will not return.”

Finally, Fuchs said, environmental and technical requirements for lubricants will continue to rise, the latter driven partly by the introduction of technologies such as fuel cells, nanotechnology and minimum quantity lubrication.

The implications for the lubricants industry, especially independents, Fuchs said, are continued difficulties. He added, however, that independents can succeed by following one or more of several strategies: specialize in niche markets; become more international in their niche strategies; offer lubricant-related services; serve as toll manufacturers; and cooperate with each other