Volumes Down, Profits Up in U.K. Grease Market?

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EDINBURGH, Scotland- While the United Kingdoms grease market has shriveled and the major oil companies have stopped making grease here, an industry expert predicted that nimble survivors face a future characterized by declining grease volumes but increased profitability.

During the last 20 years, we have seen the rapid migration of major oil companies manufacturing units out of the U.K. grease market, John Cliff of Petro-Canada Europe told the European Lubricating Grease Institutes Annual General Meeting here earlier this month. The U.K. (England, Scotland, Wales and Northern Ireland) lost grease plants owned by seven major oil companies with a combined capacity to produce over 100,000 metric tons of grease annually.

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This doesnt mean to say that the majors have gone away, Cliff added. They all have a presence in the U.K. marketplace, exporting to the U.K., primarily from the continent.

At its best in the past two decades, U.K. grease demand reached 38,000 tons, and the industry had massive overcapacity. Today the market is 18,000 tons, supplied 50 percent by major oil companies shipping from central warehouses, and 50 percent by independents. At least 11 independents are successfully manufacturing grease in the U.K. today, Cliff said, with total capacity in excess of 25,000 tons. Clearly they have excess capacity to work with.

The U.K.s 18,000-ton grease market makes up about 17 or 18 percent of Europes total grease market.

Main grease applications are primary metalworking, general engineering, construction and automotive, together consuming over 80 percent of the grease used in the U.K., said Cliff. The industrial-automotive split remains at 60 percent to 40 percent, which is traditional throughout Europe.

Lithium soaps are the predominant thickener, although there has been significant growth in lithium complex greases. Aluminum complex is also a growth area, along with certain non-soap thickeners.

The trend toward unconventional thickener systems is also stimulated by the variety of base stocks that are now available to formulators, Cliff noted. Group II, III, IV, V and even VI base fluids to be thickened in lubricating grease compositions are being studied in the U.K. at this time. This reflects environmental and also modern engineering requirements. (Europe recognizes polyinternal olafins or PIOs as Group VI base stocks, although the American Petroleum Institute in the United States does not.)

The U.K. Grease Market:

Thickener Type

Quantity in Tons

Percent

Aluminum Complex

800

4

Hydrated Calcium

920

5

Anhydrous Calcium

600

3.5

Calcium Sulfonate

300

2

Calcium Complex

300

2

Lithium Conventional

9,000

50

Lithium Complex

3,700

20

Sodium

180

1

Polyurea

500

3

Organo-Clay

920

5

Silica

600

3.5

Other Non-Soaps

180

1

TOTALS

18,000

100

Source: John Cliff, Petro-Canada Europe

Scotland has seen a significant decline in manufacturing employment in the past 20 years, Cliff continued, particularly in labor-intensive industries such as shipbuilding, car and truck manufacturing, textiles and steel. However, during the same period the total number of jobs in Scotland has increased by 65,000 as growth of the service sector and new high-tech industries, particularly electronics, have more than compensated.

Scotlands share of U.K. manufactured exports is considerably higher than its share of manufacturing employment, said Cliff. This can be partly explained by Scotlands success in attracting export-oriented inward investments, that is, non-U.K.-owned companies producing over 70 percent of all Scottish manufactured exports. And those exports are increasingly high-tech; for example, some 53 percent of all Scottish exports come from the electronics sector.

Advancing technologies and global trade have opened new markets with new demands for the grease industry, Cliff said, and the successful independent grease manufacturers are seizing these new markets and investing.

Although we were sorry to see the majors say goodbye to grease manufacture in the U.K., it is fantastic to see independents surviving, growing and investing, Cliff concluded. The future for the U.K. grease market is a decline in volume but an overall increase in profitability, which is something to look forward to.