Lube Sales: Low Ebb or Rising Tide?


Industry sources had different views on why the lubes market appeared to remain sluggish through most of 2006, with fuel prices, auto sales, increased intervals between oil changes and increased exports among the possible factors mentioned.

U.S. lubricant sales volumes in the third quarter of 2006 fell 5.1 percent compared to the same period of 2005, according to the latest sales data from the National Petrochemical and Refiners Association.

The organization Dec. 20 released its Quarterly Lubricant Sales Survey showing that volumes for the third quarter fell across all major sectors of the market. Lube Report asked industry sources why.

If you take an independent survey of a lot of marketers, from what Im hearing and what Im seeing in terms of market, sales are weak – fourth quarter especially, a large lubricant marketer said. Whether that continues in the first quarter or not remains to be seen. Its clear things could be much better than they are.

He said that weakness may not necessarily reflect base oil demand or the amount of exporting companies are doing.

For example, now theres a number of opportunities in the [Persian] Gulf, we are exporting a fair amount of base oils we werent three to four months ago, he explained. Base oil demand may still be relatively high, contrary to sales, because some folks are exporting much more now than they were six months ago. A few majors are doing the same thing.

Its more than just the third quarter, one distributor said. I think it was soft all year.

The distributor observed that the survey found sales of automotive lubes were down more notably, by 6.6 percent. We internally have attributed that to the fact that as fuel prices have risen, is there a correlation between miles driven and oil changes? he said. We believe people are expanding the miles driven between oil changes. So those two factors I think directly contribute to the softness in marketplace.

He also wonders if the U.S. fleet is driving less. If were driving less, thats putting less miles on and dictating different service intervals, he said. So we believe thats contributing to the problem as well.

He said another possible factor on the industrial side, especially in the northeast part of the country, may be industries deciding to go offshore. In that case our ability to put lubricants in those facilities is not a question of us, he said. Weve lost the business – its gone.

I would be very surprised if the overall lubricant market was down year to year, realistically speaking,” said Greg Julian, president of the Independent Lubricant Manufacturers Association.

Julian, president of Advanced Lubrication Specialties in Bensalem, Pa., said one possible factor impacting the survey results could be the fact that many major oil companies were on allocation last year because of the hurricanes. “By being on allocation, that meant people may have shifted more to the independents, the open trade and even beyond that to non-ILMA-type independents – no one has any way of capturing [data on] those gallons,” Julian said.

He said the survey may also reflect how passenger car sales were down for the year. “That would have a dramatic impact not only on [automotive] lubricants, but also on some industrial oils used in those operations,” he said.

A lube marketer whose companys business is primarily in heavy-duty engine oil said that his companys third quarter had been about the same in 2006 as in 2005. Its fourth-quarter lube sales were up.

In our case, I think its a result of us holding off on a general price increase until then, he said. We incurred a fair amount of orders at that time to beat the increase. This should subtract from our historically large volume of sales during the first quarter of this year. After a multi-year decline, our general sales volume has been flat to increasing each of the last few years.

I would guess the overall industrial market is down, with the continuing loss of manufacturing to overseas facilities, but with our historical volume so low in this area, any business we pick up is an increase, the marketer said. We have seen a general gradual decline in our farm sales but this has been compensated for with the gain of additional business in the commercial and industrial markets. Local trucking and freight transportation are definitely growing sectors.

The NPRA Quarterly Index of Lubricant Sales uses 2002 as the base year. An index value of 100 represents the average quarterly volume for 2002, calculated by dividing the total volume for 2002 by four.

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