LONDON – Western European lubricant demand shrank 1.5 percent from 2004 to 2005 according to Fuchs Petrolub AG, while lube demand grew by 1.5 percent in Central and Eastern Europe. Despite Western Europes historic role as a base oil exporter, the overall regions base oil surplus is predicted to shrink by more than 25 percent over the next dozen years.
Apu Gosalia, head of the strategic marketing department at Fuchs Petrolub in Mannheim, Germany, presented an overview of Europes lubricant and base oil markets at the ICIS World Base Oils Conference here on Feb. 17.
Fuchs estimates that the global lubricants market, excluding marine oils, reached 36.5 million metric tons in 2005, a 1 percent increase over 2004, Gosalia said. Europe accounted for just over 26 percent of that demand in 2005 – down from more than 29 percent of total world demand in 1996. Western Europes lube market was 4.6 million tons in 2005, while Eastern and Central Europes market was 4.9 million tons.
A decade ago, Gosalia said, the world enjoyed a cushion of nearly 5 million tons between base oil demand and effective manufacturing capacity. By 2004, however, that cushion had shrunk to 1.58 million tons, just a third of the 1996 level.
Europe, historically an exporter of base oils to Asia-Pacific, the Middle East and Africa, enjoyed a cushion of nearly 5.6 million tons between base oil demand and effective manufacturing capacity in 1996. By 2004 its cushion had dropped by more than half, to 2.7 million tons.
Looking at the 25 countries currently in the EU plus the 10 acceding, potential and possible candidate countries – a group Gosalia dubbed the EU 35 – Gosalia said their lubricant demand in 2004 totaled 6.28 million tons. Fuchs predicts their demand will grow at less than 1 percent annually, to a total of about 7 million tons by 2020.
The 40 base oil refineries in the EU 35 have a total effective capacity of about 8.1 million tons, said Gosalia. In 2004 the EU 35 had a base oil surplus, the cushion between demand and effective capacity, of more than 2.4 million tons. Gosalia predicts that surplus will shrink by 27 percent, to less than 1.8 million tons, by 2018.
Looking at base oil pricing trends, Gosalia noted that SN 150 prices in Western Europe have shot up since 2002. The average 2005 Rotterdam price was U.S. $590 per ton, up from about $300 per ton in 2002. The differential between SN 150 (Rotterdam) and Brent crude – the base oil margin – averaged U.S. $175 per ton in 2005.