In its annual Trends report, presented yesterday at the National Petrochemical & Refiners Association annual meeting in San Antonio, Infineum contended that past upgrades will pale in comparison to formulation changes required by looming regulatory and original equipment manufacturers’ demands.
These changes will drive up costs by prohibiting the use at todays levels of standby additive ZDDP (zinc dialkyl dithiophosphate). In addition,Infineum warned that future motor oils may not be compatible with todays engines.
Change has become an ingrained aspect of the automotive lubricants sector since the current motor oil upgrade process was adopted by OEMs and the oil industry a decade ago. But the next upgrades will require changes of a much greater magnitude, Industry Liason Advisor G.P. Pat Fetterman Jr., said during an interview after his Infineum Trends 2002 presentation.
He cited automaker demands that limits on phosphorous content be halved in the next generation of passenger car motor oils, GF-4, as well as a mandate by the U.S. Environmental Protection Agency to sharply cut truck emissions in 2007. Meeting the EPA mandate will force truck manufacturers to install exhaust after-treatment devices, which will in turn require a new heavy-duty engine oil, PC-10.
In both cases, were looking at the elimination of ZDDP, which is by far the oldest and most effective anti-oxidant and anti-wear component, Fetterman said. Additive makers will find alternatives, he said, but they wont be cheap. By definition, anything that we use to replace ZDDP is going to be more expensive.
That may not be bad for the lubricant industry. In fact, Fetterman claimed that a major upgrade may allow additive companies a chance to make reasonable returns on research and development investments. Until now, he said, the industry has implemented a rapid series of incremental upgrades that afford little time for additive makers to recoup development expenses. Over the past decade, he said, additive makers, which bear the brunt of category development expense, have experienced declining returns on capital employed.
Its not that we mind new categories, he said. We love them. Theyre the bread and butter that we live by. But we need to have them be a big enough change so that they last long enough to give us a return on our investment.
The level of change expected in GF-4 and PC-10 may bode well for additive company fortunes, but it also raises concerns about motor oil compatibility. The new oils may be so different from predecessor categories that they may not work well in older engines.
There is the potential to have some market fragmentation, where GF-4 oils would be designed specifically for new cars and PC-10 for new trucks, he said. GF-3 and PC-9 would continue being used in older vehicles.
Such a development would represent a significant complication of the motor oil market, Fetterman said, but the exact consequences are not yet known.