Argentina: Bright Spot for Lubes?


NEW YORK – Argentinas lubricant market grew more than 50 percent from 2002 to 2007 and was on track to reach nearly 350,000 cubic meters (92.5 million gallons) this year – before the late 08 global economic crisis hit. Can the countrys agricultural and automotive sectors weather the storms and keep driving lubricant demand?

Monica Vazquez, lubricants and specialties product development and OEM approvals manager for YPF S.A. in Buenos Aires, provided an overview of Argentinas lubricants market at the ICIS Pan-American Base Oils & Lubricants Conference here earlier this month. Agriculture and the automotive industry are two of the strongest drivers of the Argentine economy after the crisis [of 2002], she said, but it is exploding in this moment.

The country has experienced sustained annual growth of more than 8 percent since its 2002 economic crisis, Vazquez said, with the strongest growth in the agricultural and automotive industries. Agriculture provides half of Argentina’s exports and a third of total jobs. The automotive sector has seen a continuous flow of investment and firm growth due both to exports and local sales.The first half of 2008 showed growth at an annual rate of 6.2 percent. But, Vazquez cautioned, “this was all before the late fall 2008 economic crisis, which is global.”

Unlike consumers in many other regions, Argentinas lubricant buyers consider automaker recommendations, product quality and brand more important than price, Vazquez said. For automotive lubricants, vehicle replacement is the main reason behind switching lubricant brands. Local agreements between OEMs and lube companies are highly visible to the general public, she said, noting that YPF has special relationships with Suzuki, VW, Audi, Ford and Ford Trucks, Chevrolet, Vassalli, Scania, Porsche, Alfa Romeo and others.

Do-it-yourself oil changes account for very few oil changes, compared to do-it-for-me, Vazquez noted. We like to be served in Argentina. With the trend toward more service and convenience, she predicted great potential for a new generation of oil change centers, like the YPF boxes for oil changes inside service stations.

In 2007, Argentinas lube market totaled 330,000 cubic meters, up from just 223,000 cubic meters in 2002. Sixty five percent of that total is automotive lubricants; 33 percent is industrial; 2 percent is greases, said Vazquez. YPF has the largest market share, 34 percent of the total, followed by Shell (20 percent), ExxonMobil (12 percent), Petrobras (11 percent), Total (9 percent), Chevron (4 percent), and all others (10 percent).

Environmental protection is an increasingly important issue in Argentina, Vazquez continued. Beginning Jan. 1, 2009, new vehicle models must meet Euro IV standards. Alternate fuels are widely available at service stations, and B5 diesel fuel and E5 gasoline will be mandatory for the whole country by Jan. 1, 2010. The countrys blend of European and American specs is a challenge for the lubricant industry.

The premium end of the passenger car motor oil segment is growing; 15W-40 is the preferred viscosity grade. On the heavy duty side, top quality multigrades are gaining market share, with quality claims oriented to Mercedes Benz requirements, given that Mercedes has 40 percent of the commercial vehicle market. Because Mercedes recommends it, 15W-40 is the preferred vis grade for heavy duty engine oils.

YPF, with 34 percent of Argentinas total lubes market, also claims 34 percent of the total passenger car and the heavy duty engine oil markets. However, its share of the premium end – API SL/SM and ACEA A1-3 and B1-4 is a much larger 47 percent. Likewise, YPFs share of the high-end heavy duty market (Mercedes Benz 228.3/E3-7/API CG/H/I-4) is 48 percent.

Turning to base oils, Vazquez noted that there are six base stock producers in South America, two of which produce in Argentina: Shell and YPF. YPF is the larger, producing 244,000 cubic meters per year of API Group I base oils; 68 percent goes to the companys own lube production and 32 percent to the domestic merchant market. Shells smaller base stock refinery produces for its own consumption only.

All other players purchase their base stocks either locally or through imports, Vazquez said. And all players purchase their Group II through V base stocks through imports.

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