Victor Franco-Paredes, operations manager of Mexico City-based Comercial Roshfrans, offered a rare look at Mexicos markets at the ICIS Pan-American Base Oils & Lubricants Conference here on Nov. 30. Accurate information is difficult to obtain, Franco-Paredes noted, saying he had interviewed a range of experts to collect the data he shared at the conference. For example, estimates of Mexicos total finished lubricants market ranged from 600,000 to 900,000 metric tons per year, Franco-Paredes said; he pegged the total at 850,000 mt/y.
There are around 200 brands of finished lubricants, but only between 25 percent and 40 percent meet international quality standards, he said. The largest market share is associated with lower-price lubricants.
Mexicos market, Franco-Paredes said, offers both opportunities and challenges. With the worlds 13th largest economy, Mexican gross domestic product is expected to grow 3.5 percent in 2008. National oil company Pemex will revamp its fuel refineries over the next two to three years, to begin producing ultra-low-sulfur diesel fuels, which will prompt upgrades in the heavy-duty lubricants market. And Mexico will receive direct investment of U.S. $2.2 billion from 2008 to 2011 from Toyota, Hyundai, Chrysler, GM and Ford, to manufacture 17 different models of new vehicles, again pushing demand for high-end lubricants.
An Aging Fleet
But challenges persist, Franco-Paredes noted. The average age of gasoline-powered vehicles is around 9 years, and 75 percent of all gasoline vehicles have logged over 75,000 miles. Because used cars over 10 years old imported from the United States are exempt from import taxes, old-car imports have increased from 800,000 in 2005 to an estimated 1.8 million in 2007, frustrating efforts to improve sales of higher tier engine oils. A large portion of the lubricant market turned into commodities, where price is the key differentiation, Franco-Paredes said.
Not least, he said, political and economic stability are a requirement and a challenge for the country.
Mexicos base oil demand in 2006 totaled about 689,000 metric tons, including 120,000 mt of process oils, said Franco-Paredes, with Pemex supplying 39 percent and imports meeting 61 percent of demand. Eighty percent of the imported base oils originate in the United States; 10 percent come from Curacao, 5 percent from Russia, 1 percent each from Brazil and Canada, with other sources supplying the remaining 3 percent.
Petroleos Mexicanos, or Pemex, refines base oils at Salamanca, one of its six refineries, where it produced an average of 5,200 barrels per day of API Group I stocks in 2006. Two years ago Pemex talked about a Group II plant using Chevron technology, Franco-Paredes noted, but with [Mexicos] new government, its been delayed. There has been no recent news about any Pemex base oil upgrade or expansion, although the countrys demand for higher quality base oils will grow.
Finished Lubes
Roughly three-quarters of Mexicos demand for finished lubes is satisfied with products blended and/or packaged in Mexico, said Franco-Paredes. The remainder are imported lubricants, supplied by more than 2,100 companies – although just 20 companies provide 90 percent of the imported lubes. And the United States is the overwhelming country of origin for finished lubricants imported into Mexico.
Focusing on the automotive lubricants market, Franco-Paredes said about 2 million passenger cars are produced in Mexico annually, with about 40 percent of those exported, mainly to the United States. Nissan and GM are the leading suppliers of vehicles to the Mexican market.
API SM engine oils make up only about 6 percent of the higher-tier passenger car oil market, said Franco-Paredes. SL accounts for 63 percent, SJ for 10 percent and SF for 21 percent.
Turning to passenger car motor oils sales by channel, 38 percent by volume is sold in small mechanics shops that are found everywhere in Mexico, said Franco-Paredes. Twenty percent is sold direct to larger fleet customers; 15 percent is automakers own brands; 15 percent is sold through quick lubes; and 6 percent each is sold at gasoline stations and at retail supermarkets.
Heavy-duty Needs
Nine companies lead in the truck and bus market, Franco-Paredes continued. Mercedes Benz/Detroit Diesel is the leader, followed by International, Kenworth, Ford, GM, VW, Volvo, Scania and Man. An estimated 90,000 commercial vehicles are produced annually.
Looking at diesel fuel standards, Franco-Paredes noted that 500 parts per million of sulfur is the current limit for much of the country, with a 300 ppm limit in certain metropolitan areas. Fifteen ppm-sulfur diesel is already available at the northern border, he added.
In September 2009 the requirement will be 15 ppm maximum throughout Mexico. Were not going to meet this deadline, Franco-Paredes conceded, but were working toward it.
API CF heavy-duty oils have about 75 percent of the higher-tier diesel engine oil market. CD has 7 percent, CH has 7 percent, CI has 9 percent, and CJ has nearly 2 percent.
Close to 23 percent of heavy-duty engine oils are sold to very small owner-operators who have one to 10 trucks; 24 percent is sold to small and medium fleets (10 to 100 trucks); and 28 percent is sold to larger fleets. The remaining 25 percent is sold for off-highway applications, including mining and industrial machinery.