MOSCOW – Although global lubricant consumption will start to recover in 2010 and in 2012 reach its pre-crisis level, recovery in Russias lubricants industry will lag, a Kline and Co. consultancy official said at an industry event in November.
The global downturn has had its biggest impact on three groups of countries. Russia is standing in the most vulnerable group, comprised by such countries as Brazil, South Africa or even Australia, which are mostly dependent on export of raw materials and basic commodities, Ian Butcher, senior vice president for Little Falls, N.J.-based Kline and Co., said during the opening panel of the International Lubricants Russia 2009 Conference. Klines presentation was an overview of the global recessions impacts on the lubricants and lubricant base stock industry.
The second-most vulnerable group consists of countries with high foreign currency borrowing that are susceptible to a contagion effect: the United Kingdom, Spain, many eastern European countries as well as Greece. The third and less vulnerable group of countries includes Germany, China, Japan and other Asian countries – which are largely dependent on exports of manufactured goods. India, South Asia, Africa, Middle East, Latin America had a limited impact from the recession, according to Butcher.
Kline projects that most of the countries will start to recover by late 2010 – though a few like Russia may take longer.
Imports account for almost 60 percent of Russias consumption in higher performance lubricants, and this share is growing due to the growth of imported cars. Local blended lubes are used only in locally manufactured cars, imported pre-owned cars and cars more then eight to 10 years old, Butcher said.
Hence, the recession impacted suppliers of imported lubricants, driving sales down 40 to 50 percent in first two quarters of 2009 compared to the similar period last year. Local suppliers have also lost sales in the first two quarters this year – a 15 to 20 percent slump in comparison to the equivalent period in 2008. A similar impact has occurred in markets where Russian lubes are traditionally exported, such as Ukraine and Kazakhstan.
Suppliers of imported lubricants in Russia have been unable to compete on price because of depreciation in the countrys ruble currency. Furthermore, Butcher continued, sales channels are drying up, and important market access has been lost. The market share losses are most evident in car dealers outlets and workshops, he noted.
The key channel partners of the import suppliers are workshops and dealers of imported cars, Butcher noted. While these companies have been buying cars on credit for sales in the local market, with the collapse of demand they are unable to sell their cars and are now facing significant liquidity problems.
Overall, private and commercial transport has diminished, Butcher continued. The internal lubricants consumption for 2009 likely will fall 17 percent from the year-earlier period. Commercial and industrial lubricants consumption saw a serious drop because of the recessions effects on the automotive manufacturing industry as we well as on other industrial sectors such as mining and metals.
Passenger car sales in the first quarter of 2009 were down 60 percent compared to the similar period in 2008, Butcher stated. Sales by the biggest Russian auto maker Avtovaz and other local producers in the first quarter of 2009 were down by 40 percent compared to the same period last year. Sales of trucks and buses in the first quarter of 2009 are down by 75 and 70 percent respectively in comparison to the equivalent period last year. Sales of new passenger cars and light commercial vehicles decreased by 50 percent in the first 11 months of 2009, compared to the similar period last year, the Association of European Business recently announced.
On the industrial side, Russian steel and non-ferrous metal production was down 30 percent in the first quarter of 2009, compared to the same period last tear. Chemical sales in the first quarter of 2009 were also down 40 to 50 percent compared to first quarter on 2008. Total consumption of commercial and industrial lubricants in 2009 will be down 23 and 16 percent respectively, compared to 2008, Butcher noted.
While Kline forecasts a slight improvement, it appears that Russias lube consumption in 2010 will still be down as consumer, commercial and industrial sectors are expected to struggle during next years economic recovery. The International Monetary Fund forecasts that Russias gross domestic product will grow only 0.5 percent in 2010.
Stepping into 2010, we observe significant extension of oil drain intervals and fewer kilometers driven. At the moment, construction projects are at a complete standstill, while oil and gas production and sales are significantly reduced, Butcher concluded.