Demand for metal removal, forming, protecting and treating fluids had already experienced some losses in most areas leading up to the economic downturn, but it dropped considerably across Europe in 2008 and 2009, a major casualty of the steep declines in the automotive and ship-building industries. With manufacturing of cars, trucks and other transportation equipment in a slump, the need for primary and fabricated metals fell, making for a dismal market for metalworking fluids.

However, 2010 has proven to be a turning point in most European fluid markets. The continents demand for metalworking fluids rose at a compound annual growth rate of 2.2 percent last year to 491,700 metric tons, as the market in some key countries recovered quite nicely while others showed less progress. A combination of factors – government-sponsored economic stimulus programs, health, safety and environment concerns, the impact of REACH regulation, and more efficient maintenance and fluid optimization programs put in place by end-users and legislators – delivered a mixed bag of results.

Leading the recovery, Germany has rebounded substantially over the past year with consumption of metalworking fluids now estimated at 120,000 tons for 2010, a surge of more than 35,000 tons from the previous year. The country is the regions leading consumer of metalworking fluids, and its strong automotive industry received a much-needed boost in the form of government incentives for consumers to purchase new cars. This has pushed consumption of metalworking fluids back to near pre-crisis levels, and demand is expected to rise a slight 0.5 percent by 2015. This is good news for leading suppliers here, a list that includes global players such as BP Castrol, Fuchs, Quaker Chemical and Houghton, along with some local players.

In the United Kingdom, consumption of metalworking fluids was already down before the recession hit, having declined by a cumulative annual rate of 1.6 percent from 2004 to 2008. But demand there rose by 22 percent in 2010, nearly making up for the 24 percent fall suffered in 2009. The countrys leading suppliers, including Houghton, BP Castrol, Fuchs and Quaker Chemical, share the market with many other smaller players. The resurgence in automotive production and other industrial manufacturing has buoyed the market as the British work to rebalance their economy with a renewed focus on the manufacturing and service sectors and less emphasis on risky and volatile financial markets.

Elsewhere, the outlook is less rosy, but still improved from the recessionary period. In France, the auto industry is beginning to rebuild after sales declined by one third during the recession, but recovering from such a steep decline is a struggle. Part of the reason is that a significant amount of auto production had moved to emerging European Union countries. In the Czech Republic, for example, manufacturers took advantage of lower labor costs, and vehicle production has risen 62 percent since 2005.

The Czechs enjoyed the influx while their costs were low, posting satisfactory growth in the metalworking fluids market, albeit from a smaller base. Now, however, as the standard of living, wages and inflation rise there, manufacturers have continued their hunt for the lowest labor costs, moving significant production from the Czech Republic to North Africa and China. In the Benelux region, transportation industries such as shipbuilding, aircraft and spacecraft have also improved to some degree, but the overall market for metalworking fluids there remains flat at best.

One of the biggest challenges facing the industry and stymieing growth is the trend for end-users to adopt better fluid management and to make efficiency improvements aimed at reducing consumption and costs. New metal forming and cutting technologies that employ minimal lubrication and the use of dry machining methods are being supplemented with longer-lasting fluids and recycling programs that temper consumption of metalworking fluids.

Health, safety and environmental regulations are forcing a shift in the type of base stocks and additives being used across all segments of the metalworking fluids market. In an effort to eliminate potentially harmful chlorine-based additives and to phase out diethanolamine, the demand for more biostable fluids is growing. End-users are showing greater interest in vegetable- and paraffinic-based fluids, synthetic esters and water-soluble formulas as they work to reduce airborne mist and potential toxicity.

This movement away from petroleum-based products and traditional additives presents an interesting opportunity for smaller, specialized suppliers to gain an advantage over the well-entrenched multinational oil companies in this market. Virtually every application requires a specially formulated, proprietary blend, and the multinational corporations of the world are not only ill-equipped for this level of customization and hands-on support, but may be less interested in this product category as the trend moves away from petrol-based blends. This provides an opportunity for smaller, niche players that can meet these specialized needs more efficiently to gain a greater share of the evolving market.

As the market shifts at the end-user level toward more efficient practices, the use of different base stocks and additive chemistry and less fluid-dependent metalworking technologies, the market for traditional metalworking fluids around the world is shifting, not only in terms of technology and formulations, but geographically as well. News from Europe and other Western markets has been lackluster, industrial production is booming toward the East, opening new doors to opportunity in places like India and China.