Americas Eye Base Oil Imports

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NEW YORK – Premium quality lubricants are gaining share in Latin Americas 3 million metric ton market, but base stock supply is not keeping up, the ICIS Pan-American Base Oils & Lubricants Conference heard last week. The regions current base oil deficit will continue as blenders look abroad to meet their needs.

Jorge A. Manes, Latin American industry liaison manager for Infineum Brasil based in Rio de Janeiro, provided an overview of the Latin American lubricant market, with a focus on the growing premium segment. Its very difficult to get data on Latin American markets, he cautioned. Its all estimates.

Over the past three years, said Manes, the Latin American lubricants market, including Mexico, has grown 2 to 3 percent per year. The players are a blend of international and regional companies; Chevron, Shell and ExxonMobil lead in market share, followed by Petrobras, YPF, Ipiranga, BP and PdVSA. Automotive oils account for 60 percent of the market.

Base stock needs have traditionally been met by Latin American API Group I production, but the supply-demand picture is now unbalanced, Manes said, with imports increasingly meeting demand. For example, imports now cover 27 percent of Brazils needs, and 60 percent of Mexicos. Base oil refinery expansions and upgrades to produce Group II and III qualities have been announced, but the huge investments needed for fuels upgrades are sucking up resources, he continued. As a result, local projects will not cover the base oil deficit, and the current deficit will continue.

Engine Oil Quality
There has been significant growth in top tier passenger car motor oils in Latin America, driven by OEM requirements, said Manes. For example, in Brazil, API SJ and conventional SL oils together account for 54 percent of the market, while synthetic and semisynthetic SL and SM oils together make up 12 percent. In Argentina, SL/ACEA oils have 22 percent of the market, while synthetics and semisynthetics account for an additional 12 percent. In Mexico, SL is 36 percent and SM is 6 percent. In each country, lower grades make up the remainder. But in Venezuela, the regions exception, SJ and SL together account for 98 percent and SM for 2 percent of the motor oil market.

On the heavy duty diesel oil side, there is a steady volume migration to premium grades (API CI-4 and Mercedes Benz 228.3 specifications and higher), displacing monograde volumes.

Latin America offers a mix of motor oil quality regulations, Manes noted. In Chile, for example, a voluntary private effort by Asolub, the Asociacion de Productores de Lubricantes, set minimum standards beginning in 1993, driving lower quality oils from the market. Today, on the heavy duty side, API CD and lower grades account for less than 5 percent of their market, and on the passenger car oil side, API SE and lower grades account for less than 2 percent.

Mexico has followed a different course, said Manes. There, regulations set minimum commercial information standards for both heavy duty and passenger car packaged lubricants, and require that API SE or API CC and below be labeled … not to be used in any engine, unless specifically indicated by the OEM. But despite this approach, no authority enforces the regulations.

In Venezuela, the Ministry of Energy and Mines regulates minimum qualities for crankcase lubricants – currently API SL and API CF/CF-2. Lubricant plants are audited on behalf of the Ministry, which enforces the regulations.

Brazils lubricant quality regulations go back to 1981, Manes continued, and API SF and CF are currently the minimum standards. Brazils innovation, launched in 2006, is a quality program implemented by the National Administration of Petroleum, which reviews data submitted about lubes against the product labels, supported by random product quality sampling. Each month, Manes explained, the agency issues a report with company names, brands and deviations from product specifications.

Push for Premium
A variety of influences drive emissions legislation in Latin America, which is a diverse market, said Manes. Many countries have adopted European and/or U.S. requirements, and many have developed plans to move to lower sulfur gasolines and diesel fuels. However, this requires a huge investment in the refining sector, and as a result, low sulfur fuels are still scarce today. Fuel adulteration is also a concern in some countries, while biodiesel from sources other than soy cause concern because of variability and low quality. Gasolines may also contain sludge precursors, further complicating the move to premium lubricants.

In addition to fuels issues, the Latin American market is characterized by small auto engines, and particularly the severe conditions posed by one liter engines, and by the challenges of flex-fuel vehicles in Brazil. As a preventive measure, OEMS often reduce their recommended drain intervals in Latin America compared to recommendations in other regions of the world.

In Latin Americas premium lubricants markets, passenger car motor oil blenders encounter a combination of industry-wide and specific OEM requirements. For example, API SL or higher may be combined with ACEA and VW, Mercedes Benz and/or Ford requirements. With SAE viscosity grades lower than 15W-40, semi-synthetic or synthetic base oils are used, resulting in a growing demand for imported Group III base oils over the past five years.

The heavy duty sector also combines industry and OEM specifications, Manes continued, and like the passenger car segment, uses mineral base oils for 15W-40s, but has moved to semi or full synthetics for lower viscosities.

Latest Trends
OEMs are very specific about their factory fill requirements, said Manes, which go above and beyond the quality level in the marketplace. For example, VWs mid-SAPs requirements in Mexico and Brazil have required use of Group III base oils. The introduction of lower viscosity lubricants is another emerging trend, impacting the choice of base stocks.

Challenges include meeting Euro III soot-handling requirements, improving fuel economy in light duty diesel vehicles, and development of biodiesel-capable lubricants. Soon Euro IV-capable lubricants will be needed, which will significantly restrict base stock choices.

Premium lubricants will continue to increase their market share, Manes concluded, driving the increased use of nonconventional base stocks. Latin American lubricant companies are now assessing importing base oils, and grappling with the question, which grades? Finally, Latin America offers clear opportunities to differentiate premium oils in the marketplace by emphasizing extended drain intervals, fuel economy and environmental claims.

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