The United States demand for finished lubricants is expected to grow at a modest compound annual rate of 0.2 percent over the next five years, while Mexicos will jump by 1.3 percent and Canada will decline by 0.4 percent, according to a new study by Kline & Co. consultants.
The U.S. makes up 80 to 85 percent of the roughly 3 billion gallons per year market in North America. Canada and Mexico each comprise 5 to 8 percent of demand.
I would say Canada is slightly larger than Mexico, said Sushmita Dutta, project manager at Kline, in a webinar Thursday. However, Mexico is rapidly catching up with Canada in demand, and it is expected that Mexico might surpass Canada in the future.
Not surprisingly, the sizes of the nations lubricant markets are roughly in proportion to the sizes of their economies. According to the International Monetary Fund, the U.S. gross domestic product is $18.5 trillion, while Canadas is $1.5 trillion and Mexicos sits at $1.05 trillion.
Additionally, the vehicle parc in the U.S. is roughly seven times greater than that of Canada and eleven times greater than that of Mexico, according to the International Organization of Motor Vehicle Manufacturing, leading to greater lubricant demand.
The industrial segment accounts for almost half of demand in the continent, as it is easily the largest segment in both American and Canadian demand. In the U.S. the consumer automotive segment follows, with commercial automotive lubricants close behind, while the order is reversed in Canada.
In Mexico each market segment has a share that ranges between 30 and 35 percent. As Canada and the U.S. are more developed and industrialized nations, the countries have larger industrial sectors, consuming more industrial lubricants than Mexico.
Mexicos industrial segment is growing, however, as the countrys manufacturing industry continues to swell. Over the past 20 years a diversified labor pool, low wage costs and close proximity to the U.S has led to increasing demand for industrial oils and fluids.
Significant growth in passenger vehicle sales due to stability in vehicle prices in spite of the U.S. dollars strength, the easiness for buyers to obtain credit and loans to purchase new vehicles and a reduction in the number of imported used cars from the U.S. has caused an increase in demand for consumer automotive lubes.
Demand for commercial automotive lubricants in Mexico will grow alongside the countrys modernization and expansion of its commercial vehicle parc. An escalating construction sector has also, contributed to higher lubricant demand.
Although Canada saw an increase in commercial vehicle sales last year, primarily for light trucks and pickups for short-distance trading and logistics activities, Dutta does not expect that to spur much lubricant demand. This has led to an increase in the overall sales of commercial vehicles, however, this will not have a great influence on the overall lubricant market.
Photo: Ginnette Riquelme/ Newscom
Slow growth of Canadas economy has led to declining passenger vehicle sales, hindering the countrys consumer automotive lubricant demand. Falling demand for passenger cars is causing a decline in passenger car production levels, shrinking the countrys need for industrial oils and fluids.
The production market is facing competition from Mexico as the latter is emerging as a hub of [automobile] producers, especially car producers in North America, Dutta noted. The country is also witnessing a slowdown in its oil and gas sector due to low crude prices caused by the fall of crude oil prices in 2015.