The traditional base oil market has become pretty lively in the last few years, and volatility seems to be the new norm, according to an Ashland Consumer Markets executive.
In fact, global procurement is becoming increasingly dynamic, making life interesting for Neal Zuzik, director of global procurement for Ashland Consumer Markets, which owns the Valvoline brand. Zuzik, who has worldwide responsibility for sourcing base oils, additives and packaging, recently sat down with Lube Report to discuss the challenges he is facing in the marketplace.
A lot of new capacity has come on line, and high-quality base stocks are now available around the world, Zuzik says, adding that as a result, you can formulate for premium performance pretty much anywhere in the world.
He noted that high-quality API Group II and Group III oils, in particular, are now more plentiful. For a long time, high-quality Group IIIs were coming primarily out of Korea. Now they are coming from many different places, he said.
The same is true with the Group II oils. The United States was the dominant Group II producer for years. Now, with several new Group II plants that have opened in Asia, and others set to come on line in the next few years in other regions, theres a potential for overcapacity in certain markets, Zuzik said.
But realistically, he added, the dominant output of a refinery is fuel. And when fuel prices are high, refiners will shift output away from base oils. In that scenario, the big challenge is security of supply.
Also, better quality rerefined oil is more readily available. A lot of new rerefined capacity has been announced, Zuzik said. Five to 10 years ago, the rerefined oil industry served fairly local markets. Now, they are expanding to serve global markets. We see these materials being produced in many countries around the world with more to come.
Zuzik noted that packaging trends have become interesting in the last couple of years. For example, the bag-in-box concept is one result of the push for more sustainable packaging. Sustainability has also led to the use of less HDPE resin in plastic bottles to make them lighter and to reduce waste. But packaging requirements can differ around the world. With our business becoming more global, ensuring that we have the right type of packaging for a particular region is a real challenge. Its a whole new dynamic for us, he said.
Another trend is the conversion from historical quart bottles to larger packages. Multi-quart packaging is much more convenient for the consumer, Zuzik said. Retailers have responded by stocking the larger bottles. We have adjusted our operations to handle the larger size bottles.
Overall, this is an exciting time for procurement managers. With shifting consumer trends and so many changes taking place in the supply base, Zuziks role has become a critical link in the Valvoline supply chain.
Its a challenging market, but we see some good opportunities to build our business and support our international growth in the years ahead, he said.