U.K. Auto Lube Trade on Slow Road to Recovery

The Covid-19 pandemic has caused about 70 percent of garages and workshops to close and kept vehicles off the roads, depressing fuel sales by 75 percent and car sales by 97 percent, year on year.

Consequently, the PCMO market has gone quiet, David Wright, the director general of the United Kingdom Lubricant Association, told Lubes’n’Greases.

To compound matters, the government has granted six-month extensions on renewals of mandatory vehicle tests as a reprieve during the outbreak. This has displaced service-fill work since many drivers get their cars certified and serviced at the same time, said Wright.

The U.K. is Europe’s third-largest consumer of finished lubricants, according to a market study by United States-based industry consultancy Kline & Co. The study found that the top five lubricant markets in Europe account for nearly two-thirds of the region’s demand. Russia, Germany and the U.K. alone make up about half of the total market.

“Whilst there is no doubt we have seen an impact from Covid-19 on our European finished lubricants business, this has primarily been on transport lubricants, and PCMO in particular, given the number of shutdowns in the automotive sector,” Kerry Larkin, U.K. and Ireland country manager for Petro-Canada Europe, told Lubes’n’Greases. 

There was more hope in the industrial and metalworking fluid space as customer orders grew to avoid supply chain disruptions in April. But this uptick has since passed.

“Now orders are slowing as companies have stocked up and need to sell through,” said Wright. “In the U.K., the talk is that the economy may well go into recession and forecasts are a 7 percent retraction.” 

The Covid-19 pandemic has ripped through the global economy and could plunge it into the worst recession since the Great Depression of the 1930s, according to the IMF. The lubricants industry, like the rest of the hydrocarbons value chain, has not been spared the pain, with companies across Europe affected by the deadly virus, which at the time of publication had infected more than 1.62 million people and claimed 151,000 lives, with the worst outcomes in Europe in Spain, Italy, Germany, France and the U.K.

Meanwhile in Germany, Europe’s biggest economy, some lubricant companies said they were still busy, “but some fear a sharp decrease in lubricant production very soon,” said Stephan Baumgartel, head of the German Lubricant Manufacturers Association. 

“The companies explained the current positive situation is because customers are filling up their stocks with lubes,” Baumgartel said. In Germany, where the manufacturing industry contributes about 25 percent to the total economy, a decrease in production will lead to a strong decrease in lube consumption, he warned.

Larkin remains optimistic about a continued upward demand trend.

“With European and U.K. automotive plants starting to open up, the outlook is certainly looking more positive,” Larkin said.