U.S. demand for synthetic lubricants and functional fluids — not including the hangdog category of antifreeze — will enjoy 7.2 percent annual growth for the next four years, expanding into a $1.7 billion market, says a new study from Freedonia Group Inc.
Antifreeze, however, is seen as having a chilling effect on this sunny outlook. Largely based on glycol chemistries, heat transfer is a mature, commoditized market which actually shrank 1 percent a year during the late 1990s. It will grow only sluggishly through 2006, the new study finds.
Much stronger growth is expected for synthetic lubes, including engine oils, hydraulic and transmission fluids, metalworking fluids, dielectric fluids and others. From 1996 to 2001, Freedonia says, demand for these products in the United States grew from $829 million to $1.2 billion, an annual rate of 7.2 percent. The firm expects the same hot pace to be sustained, reaching $1.67 billion by 2006.
In announcing its forecast last week, the Cleveland, Ohio, market research firm predicted the annual growth will be healthiest for hydraulic and transmission fluids and engine oil. It also expects growing use of Group III base oils, as well as polyalphaolefins (PAOs).
Freedonia’s study, “Synthetic Lubricants and Functional Fluids,” identifies demand and supply factors for the growth predictions. On the demand side, it cites increasing performance standards for automotive and industrial lubricants, including the scheduled introduction of GF-4 passenger car motor oils next year. The study adds that tightening environmental regulations will also spur demand.
On the supply side, the study states that Group III base oils will become increasingly popular because of their ability to approach PAO performance at much lower cost. Freedonia expects demand for Group III to rise faster than other base stocks, but also foresees “strong growth” for PAOs, esters and other Group IV base stocks.
Synthetic base oil marketers agreed that PAOs will continue to have a place in the market, although it will be limited to applications where they must be used for performance reasons.
“This is especially true in the United States where Group III can be marketed as synthetic,” said Matti Lehmus, sales manager for Fortum, a Finnish supplier that markets Group III base oils in the United States and Europe and PAO in Europe. Unlike many European countries, he noted, the United States allows lubricants made with Group III base oils to be marketed as synthetic.
Freedonia’s 269-page study (available for $3,800, see www.freedoniagroup.com) forecasts that demand for synthetic hydraulic and transmission fluids will grow 9.3 percent per year through 2006. It sees demand for synthetic engine oils increasing 8.1 percent annually, with growth strongest in the heavy-duty market. The study projects annual growth rates of 5 percent and 5.7 percent, respectively for synthetic metalworking and dielectric fluids.
The study projects a “meager” 2.2 percent annual growth rate in the heat transfer fluids market, which accounted for 46 percent of U.S. synthetic fluid demand in 2001. Synthetic products from companies such as Dow, Bayer and ExxonMobil Chemical dominate the field, a Freedonia spokesman told Lube Report, and over 90 percent of the high- and low-temperature heat transfer market is already using synthetics, especially glycols, in vehicles, process industries, energy generation and factory fill for new equipment.