South Africa Drives Food-Grade Lube Market
South Africa is one of the biggest industrial economies in Africa, with highly developed agriculture and food-processing sectors. As activity increases, so will demand for food-grade lubricants. Shem Oirere takes a bite out of this modest but key lubricants segment.
One driver of South Africas lubricant demand is the growing primary and secondary food-processing sectors, according to market researchers and the countrys Department of Trade and Industry. Bottling plants, industrial bakeries and vegetable canneries use food-grade lubricants, a small but essential segment of the finished lubricant market, which has a current global market size of around 47,000 metric tons per year and is predicted to rise to 64,000 t/y, according to various sources.
Food-grade – or more accurately food-processing – lubricants are blended from a variety of highly refined mineral oils, polyalphaolefins, polyalkylene glycol and alkylated naphthalenes, among others. These products are used across the food production chain and perform a variety of functions, such as preventing wear, corrosion and oxidation, and improving heat dissipation and power transfer across a range of applications, including hydraulic systems, conveyor gears, molding equipment and ovens. They are also expected to meet several international and local standards, in particular ISO 21469 and the United States Food and Drug Administrations Title 21 CFR 178.3570.
As South Africas diverse local and international food, ingredients and retail companies invest in new assets and maintain existing ones, they will also increase lubricants consumption. Over the past four years, food market leaders such as Tongaat Hulett, Tiger Brands, Pioneer Foods and RCL Foods have invested in capacity expansion, mergers, acquisitions, new machinery and equipment replacements that will continue driving growth of food-grade lubricant demand. Tiger Brands announced a nearly U.S. $70 million investment for 2017-2018 that includes $39 million for capacity expansion. This could, in turn, influence manufacturing and supply trends for lubricant companies.
Players with Food
Companies including Engen Petroleum Ltd., Fuchs and Total SA supply the South African market with a range of food-grade lubricants, many of them with ISO 21469, halal and kosher certifications to meet legal and religious stipulations.
Total, for example, offers its Nevastane brand for processing machinery and equipment such as blenders, conveyors, gear boxes, slides, conveyor chains, packaging equipment and canning machines. But there are a host of other players with a presence in the country, such as Germanys Kluber, the U.K.s Rocol, LPS from the U.S. and PetroCanda.
Intensified competition is expected following the agreement in December 2017 between Germanys Fuchs Lubritech and subsidiary Fuchs Lubricants South Africa to establish a specialist lubricants division in the country. Fuchs already supplies its Cassida range imported from Germany, as well as Fuchs Lubrasa, which was a dedicated food-grade producer in South Africa acquired by the company in 2014. Fuchs food-grade lubricants are mainly used in the canning, meat processing and beverage sectors.
The purchase of Fuchs Lubrasa allowed Fuchs to have a food-grade manufacturing facility in South Africa, Giles Cutter, Lubritech divisional manager at Fuchs Lubricants South Africa, told LubesnGreases.
Fuchs Cassida range of chain oils include several food and beverage greases, which the company says have been certified by South Africas Public Health and Safety Organization and NSF International, while the companys production plants are certified ISO 21469.
It is not all plain sailing for food-grade lubricants suppliers, despite its relatively advanced market. Cutter warned that South Africa is erratic.
For those [food processors] who take it seriously, demand is consistent and we support them well. However, there is a premium to be paid for food-grade products, due to their specialist nature, and many companies who are on a cost-saving drive only apply food-grade products where forced to, he said.
But that is gradually changing as the country is expected to intensify compliance with international standards such as BRC Global Standards, which requires more rigorous adherence to food safety, Cutter said.
Recent listeriosis outbreaks, while not lubricants related, brought food safety into sharp focus and companies who are serious about it are reviewing the critical risks. Lubricants are an integral part of the production process, he remarked.
Incentives to Growth
Before the recent modest recovery of manufacturing output, South African lubricant suppliers expressed concerns over the sluggish performance of the economy, which, coupled with depressed crude oil prices, impacted on the uptake of lubricants products. The countrys economy was hit hard by a currency crash and subsequent recession in the few years leading to 2018.
Engens managing director, Datuk Farid Adnan, said in the companys 2016 annual report that the 0.2 percent growth of South Africas economy had dampened sales of its main food-grade product, an NLGI 2 aluminum complex multipurpose grease. Engen is a subsidiary of Malaysias Petronas Lubricants International.
Other market observers see a brighter future for new entrants in the countrys food-grade lubricants market. Global aggregator and publisher of market intelligence research reports, Ken Research, says in its South Africa Lubricant Market Outlook to 2020 report that investors keen on the South African petroleum industry, especially those targeting food-grade lubricants, could profit from anticipated demand from the countrys food and beverage industry, which is expected to flourish over the 2016-2020 period.
South Africas Department of Trade and Industry unveiled incentives to encourage the manufacturers, suppliers and consumers of food-grade lubricants to expand operations in the country. These include the Business Process Services, a scheme to woo additional private-sector investments in South Africa and create more jobs through off-shore activities; the 12i Tax Incentive, which supports investments in priority sectors of more than $139,000; and the Manufacturing Investment Program, which offers grants of up to 30 percent of qualifying investment costs in machinery, equipment, commercial vehicles, land and buildings required for production facilities.
Other incentives include a reimbursable cost-sharing grant, support for project feasibility studies to increase local exports and stimulate the market for South African capital goods and services, financial support to improve critical infrastructure and the Manufacturing Competitiveness Enhancement Program to enable manufacturers, such as food processors and lubricant makers, to upgrade production facilities to sustain employment and maximize value-addition.
Consumption of food-grade lubricants is likely to increase in South Africa after economic growth of 1.3 percent was reported in 2017, with predictions of 2.1 percent by 2020. This is likely to lead to more household income for a number of South Africans, triggering a surge in demand for convenience foods and other factory-processed edibles. In turn, it will create more opportunities for expanded food manufacturing in a country that reported $44.8 billion in food retail sales for 2017, according to U.S. Department of Agriculture. This is good news for lubricant manufacturers across the board, not just food grade.