Asia Paces Global Growth for Lubes


OSTFILDERN, Germany – The worlds appetite for lubricants has begun growing again, but only because Asias emerging markets are far outstripping the mature, flat-lining markets of North America, Western Europe and Japan, according to data presented here last month.

Updated figures for 2004 show 1.8 percent growth in worldwide lubricants demand including marine oils – a clear recovery over the prior year, says Georg Lingg of Fuchs Petrolub AG. Speaking to the 15th International Colloquium Tribology at the Technische Akademie Esslingen, he said world lubes demand hit 37.9 million metric tons in 2004, propelled by disproportionate growth in China and Brazil.

However, todays shifts in demand go beyond geography, the Mannheim-based executive said in his Jan. 17 address to the colloquium. The quality and type of lubricants consumed in each region, and not macroeconomic markers such as vehicle population and GDP growth, are important indicators of the best opportunities for lube sellers, said Lingg, head of the companys industrial lube technology, supply chain and marketing.

Over the last 14 years, certain world regions have gained and others have lost, he observed. Europes share has fallen from 38.9 percent of global lubricants demand in 1990 to only 26.3 percent in 2004. Particularly hard hit has been Western Europe, where demand in 2004 fell to just under 4.7 million metric tons, its lowest in the past 15 years.

Gaining in this struggle have been the recovering economies of Central and Eastern Europe. Here, lubricants demand surpassed that of Western Europe for the first time since 1997, and reached 4.8 million metric tons in 2004.

Of course, Lingg acknowledged, Asia Pacific and Near/Middle East [together] continue to be the largest, most dynamic lubricants region in the world, with around 37 percent now of global lube supplies. In 1990, though, this regions share was only some 25 percent.

Lingg, who in January took a seat on Fuchss executive board, credited all data to his co-author, Apu Gosalia of the companys Strategic Marketing Department. Looking at individual countries, he said, their research shows that the United States continues to be the worlds single largest lube consumer, with 20.4 percent of the total volume, said Lingg. Next is China at 11.2 percent, Japan with 5.2 percent, and Russia (4.4 percent). Brazil, India and Germany fill the ranks of the top seven consumers.

Per-capita demand for lubricants in each of these countries, however, suggests that the mature markets can expect to lose ground even more quickly to the populous, developing ones. Per capita lube demand in the United States, for example, is 25.1 kilograms a year. In Japan its 14.7 kg/year and in Germany 12.5 kg. By contrast, despite their rapid economic expansion, Chinas per capita hunger for lubes is still only 3.1 kg/year, and in India it is a mere 1.1 kg. – leaving far more room for growth.

Overall, 55.7 percent of the worlds lubricants today are used in automotive applications (once, it was greater than 60 percent), and more than half of that goes into commercial use, i.e., fleets and off-road, and less than half into passenger cars and vans, Lingg said.

Automotive lube use varies widely by region, however. For example, at 47 percent, the lowest automotive lubricants share is in Western Europe; the highest is Near/Middle East, where they make up approximately 74 percent.

Whats more, there has been a marked decoupling of GDP variance on the one hand and lubricants consumption on the other, Lingg stated. The world just needs fewer lubricants per unit of economic output in the course of time. He even sees a negative correlation in the case of Western Europe, where GDP has grown in the past 10 years while lube demand has actually declined.

This would suggest for highly industrialized and motorized parts of the world that the more money people have in their pocket, the more they go for sophisticated, advanced-quality lubricants and high-performance lifetime lubricants, Lingg suggested. Compounding this effect are lower volatility rates (meaning less need to top-off) and fewer total-loss lubricant applications.

Even in Asia this trend is being felt. Despite the rapid expansion of car ownership, on a global basis, lubricants demand has stopped directly following the increase in vehicle population in the past 10 years, he said. Fewer lubricants were consumed per vehicle as a result of longer drain intervals and improved materials management. If you look at the new equipment rising to replace the old truck and bus fleets in a country like India, he added, it is clear that future generations of vehicles will fully exploit maximum lube efficiency, and thus dilute underlying growth.

On the industrial side, too, the longstanding correlation between industrial activity and lubricants demand has weakened, so using industrial output to predict the strength of lube demand is no longer valid – though it may signal the direction demand will take. For now, industrial lubricants are chugging along, growing an average 2.6 percent a year over the past five years, Fuchss research shows. Hydraulic oils are the largest product group here, followed by specialty products and process oils.

Turning his attention to the players in the global lubes marketplace, Lingg said Shell is the volume sales leader if you exclude marine oils, followed by ExxonMobil; if you include marine oils, the two would be equally sized. BP, Petrochina and Sinopec (together), and Chevron rank third, fourth and fifth, while Total, Lukoil, Fuchs, Nippon Oil and Valvoline round out the top 10 (without marine oils).

Overall, there are more than 1,400 manufacturers of finished lubricants in the world, and the top 1 percent of these supply more than 60 percent of global demand. The lubricants industry – like the chemical industry – is still a fairly fragmented world and will undoubtedly see more change and significantly fewer players, Lingg predicted.

Lubricants volume growth will continue to be only moderate and will take place just in certain countries and world regions. But there will be much qualitative growth in terms of lube technology and environmental compatibility, and that is where the opportunities lie.

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