LONDON – With preliminary 2008 data in hand, Apu Gosalia of Fuchs Petrolub ventured that global lubricant demand fell by 2 to 4 percent from 2007 to 2008, and 2009 will certainly be down again. But longer term, he said there is still enormous growth potential for lubricants in Brazil, Russia, India, China and the Next 11 emerging countries.
Gosalia, head of strategic marketing at Fuchs headquarters in Mannheim, Germany, identified lube industry trends and opportunities at the ICIS World Base Oils & Lubricants Conference here Feb. 19.
While Gosalia declined to put a number on total global lubricant demand for 2008, he noted that preliminary 2008 data is now available for the United States, Japan, France and Italy, which together account for 30 percent of the global lubricants market. Overall, lube demand in these four countries declined 7 percent from 2007 to 2008, Gosalia said.
Anticipating moderate growth in emerging markets, or at least stagnation in the rest of the world, Gosalia predicted the total decline in world-wide lube consumption from 2007 to 2008 was 2 percent. In a worse-case scenario, he said, worldwide volumes will have come down by about 4 to 4.5 percent.
Lube Demand Outlook
In 2007, Gosalia said, total world lubricant demand was 37.1 million tons. Asia-Pacific was the biggest regional market, with 33.5 percent; North America second with 20.9 percent; Central/Eastern Europe, 13.6 percent; Western Europe, 12.6 percent; Latin America, 9.2 percent; Africa, 5.2 percent; and Middle East 5 percent.
Per capita demand differs markedly by region. North American consumes 23.4 kilograms per capita, Western Europe 11.5 kg, Africa just 2 kg. The worldwide average consumption is just 5.6 kg per capita. An ongoing quality push, which to a large extent is responsible for the continuous decline in overall North American lube consumption, will also lower their current per capita demand in coming years, Gosalia said.
The worlds top 20 lubricant markets are led by the U.S. (consuming 7 million tons in 2007), followed by China (4.5 million tons) and Japan (less than 2 million tons).
Interestingly, the second largest lubricant nation, China, has the second lowest per capita demand among the top 20, just 3 kg per year, said Gosalia, and it is clear what this means in terms of future growth potential.
The top 20 lubricant manufacturers together command two-thirds of the worlds lubricants demand. Shell is world market leader, said Gosalia, followed by ExxonMobil. Together, these two top players share 25 percent of the worlds market.
Fuchs had projected last fall that global lube demand will increase 1 percent annually to 41.3 million tons in 2017, said Gosalia, but maybe we should be using 0.5 percent, not 1 percent. He has revised his projection for 2017 downward to 39 million tons.
For 2009 I will not come up with a figure, Gosalia continued, but I believe that down 10 percent on a global basis is too high. Gosalia noted that a soft turnaround in the second half of this year is possible, and demand in emerging markets and developing economies continues to be positive.
BRIC & N-11: a Brighter Future
The worlds top emerging markets are headed by Brazil, Russia, India and China, or BRIC, and the next tier of 11 countries: Mexico, Nigeria, Egypt, Turkey, Iran, Pakistan, Bangladesh, Indonesia, Vietnam, the Philippines, plus South Korea (a developed country which many argue should be at the top of the list).
Gross domestic product of the BRIC countries is forecast to surpass that of the G7 (U.S., Japan, Germany, U.K., France, Italy and Canada) by 2032, said Gosalia. They are expected to have nearly double the GDP of the G7 by 2050. While the next 11, or N-11, are unlikely to rival the BRICs in scale, their aggregate GDP could reach two-thirds the size of the G7 by 2050.
Nearly all N-11 countries have population growth rates above those of Western developed countries, indicating greater consumer market potential.
Looking at changes in lubricant demand from 1997 to 2007 in the G7 (where lube demand dropped 5 percent), BRIC (where lube demand climbed 3 percent) and N-11 (demand climbed 2 percent), Gosalia noted that the link between GDP and lube demand has been decoupled in mature markets. In emerging markets, the trend to higher quality lubricants will lower demand volume at the same time economic development spurs demand growth, making it impossible to predict lube market share to 2050.
While the global lube market increased just 1.4 percent in the past decade, Gosalia continued, lube demand in the BRIC and N-11 regions increased by 30 percent, from 6.9 million to 8.9 million tons in the BRIC and from 3.7 million to 4.8 million tons in the N-11. China and Brazil achieved the largest market growth rates, of around 50 percent each. The sole volume drop came in the Russian market, which declined from 1997 to 1999, but has seen a clear recovery since 2000.
Looking at lube demand for the BRICs and N-11, China is by far the largest on a nominal basis, with close to three times more demand than second place Russia. But China has a middling ranking in per capita demand (3.5 kg per capita consumption), while Korea takes the lead with 18 kg of per capita consumption. India, with a lube market of 1.2 million tons, has per capita demand of only 1 kg.
It can be concluded, said Gosalia, that there is still an enormous growth potential for BRIC and N-11 countries in terms of [lubricant] quality and quantity.