After rebounding strongly in 2010, the lubricant industrys recovery from the recession slowed in 2011, according to estimates from Fuchs Petrolub AG.

The planet consumed 35.1 million metric tons of lubes in 2011, Apu Gosalia, the companys head of global strategic marketing said in February at the ICIS World Base Oils and Lubricants Conference in London. That was an increase of just 1.9 percent from 2010.

Last years unspectacular performance came after a year (2010) in which global demand rose 7 percent to 34.5 million tons. The recession had caused consumption to fall to 32.2 million tons in 2009, the lowest level since Fuchs began making global estimates 40 years earlier.

The estimate for 2011 remained 5.4 percent off the pre-recession peak of 37.1 million tons in 2007. Gosalia predicted that it will take years for the industry to fully recover.

We will not see the peak number of the years 2006 and 2007 again in the short term, he said.

Fuchs, which is based in Mannheim, Germany, is the worlds largest independent lubricant producer. Its estimates do not include bunker lubricants.

After the rise and fall involving the recession, the volume of lubricants consumed worldwide has not changed much from 2000, when Fuchs calculated demand to be 36.4 million tons, Gosalia said.

With a difference in lube consumption of just a little over 1 million tons between 2000 and 2011, one could think that not much happened over that time frame, Gosalia said. But in fact it did, if you look at changes in the underlying regional lube market dynamics, which were enormous in terms of quantity and quality.

In 2000, Asia-Pacific, the Middle East and Africa combined to account for 39 percent of worldwide consumption. By last year, their portion had swelled to 52 percent. The Americas share shrank from 34 percent to 28 percent over that same span, while Europes dropped from 27 percent to 20 percent.

Of course, China and India are primarily responsible for Asias ascendance. Gosalia showed China and the United States in a virtual tie for the largest lube market, with demand of 6 million t/y. India has moved into fourth behind Japan – both a bit more than 1.5 million t/y, Fuchs estimates – followed by Russia, Brazil and Germany.

Based on per capita lube usage, China has the potential to far surpass the U.S., Gosalia said. The U.S. has the worlds highest per capita rate of lube consumption at 20 kilograms per person. Chinas has increased in recent years, but its rate remains far lower, at 5 kg/person.

This shows the growth potential that lies in a country like China, although it will likely never reach the U.S. level of per-capita demand, Gosalia said. Instead, China is an emerging market which is starting to transition to a mature market, and a more probable model is to reach the overall lube appetite for Europe – which is around 9 kg per person. If we translate this to China, its total market someday will be around 12 million tons.

Gosalia predicted that regional trends in volumes and qualities of lubricants will continue for the foreseeable future. But he added that it is difficult to forecast global demand for the current year, primarily because of potential fallout should one or more European nations default on their debt.

With no solution yet found for the paralyzing euro zone financial crisis, the industry remains in a challenging situation, he said.

Europes Base Oil Surplus Erodes

European lubricant blenders have long benefited from production surpluses that keep availability loose while tamping down prices. But that luxury is fading, according to Stephan Baumgaertel, executive director of the German Lubricant Manufacturers Association, who spoke at the tribology colloquium in Ostfildern.

Baumgaertel said capacity for API Group I oils will continue to decrease and that new sources of more highly refined stocks are unlikely to replace what is lost. The result, he said, will be a fundamental decrease in availability of base stocks for the region. We expect base oil prices to increase in the future, he said.

Base oil capacity in Western and Eastern Europe fell approximately 2.3 million t/y between 2008 and 2010, Baumgaertel said. Availability in Europe tightened significantly during that period, and prices underwent steep increases. Unfortunately for blenders, Baumgaertel said, several factors work against a return to the status quo.

First, crude oil costs are rising, which pushes up prices for other petroleum products, including base stocks. Secondly, global crude supply is shifting to crudes that are lower in viscosity, higher in sulfur, lower in waxiness – all of which makes feed-stocks that are less conducive to base oil production.

Growing demand for fuel is another factor inhibiting creation of base oil capacity. Global base oil capacity has undergone large shifts from Group I to Group II and Group III production. Group II and III plants have more flexibility in the types of feedstocks they can use to make base stocks. However, unlike Group I plants, they also have flexibility to shift production between base stocks and certain types of fuel, including diesel and jet fuels, both of which are in high demand. Base stocks carry better margins than fuels, but they are also more complicated both to produce and to sell.

Baumgaertel acknowledged that a slew of new Group II and III plants have come on-stream the past few years or are slated to start up in the near future – mostly in Asia. Operators of many of these plants have said that they plan to market portions of their output in Europe.

Baumgaertel predicted, however, that oils from these plants will end up staying in the regions where they are produced, or that amounts exported to Europe will not keep pace with capacity losses in that region.

It is very likely that there will not be new capacities available for the European market, he said.

At the very least, he suggested, the volume of base oils – including imports – that are available to Europe in the future will constitute less of a surplus than the region has enjoyed in the past. That fact alone would tend to increase prices.

Diesel and jet fuel are by far easier to sell, and demand [for them] is increasing strongly, Baumgaertel said. When this happens, refiners have less incentive to make base oils.

Lubrimetal Builds in U.S.

Lubrimetal of Italy will invest 1.4 million over the next three years developing a manufacturing facility in North Carolina, U.S., for production of wet and dry lubricants for steel and non-ferrous wire drawing.

The new facility, expected to create 19 jobs, will allow Lubrimetal to meet growing market demand in North America for wire drawing lubricants, according to a January announcement by the North Carolina governors office. Wire drawing is a metalworking process used to reduce the cross-section of a wire by pulling the wire through one or more dies.

The creation of a new factory in the United States has been an important part of our global strategy, said Giorgio Corso, executive vice president of Lubrimetal. The company exports 60 percent of its production globally.

Lubrimetals products include dry lubricants based on calcium and sodium; oils and greases for wire drawing; emulsifiable oils for wet wire drawing; and corrosion inhibitors. Its brands include Lubrifil dry lubricants and Lubriol wet drawing oils.

Founded in 1959, Lubrimetal is based in Vercurago, in northern Italy.

2011 Healthy Year for Fuchs

Fuchs Petrolub AG posted 2011 earnings of 183 million on sales revenue of 1.7 billion, up from 2010 earnings of 172 million on sales of 1.5 billion.

For 2011, earnings per share increased approximately 7 percent to 2.56 per ordinary share and 2.58 per performance share. The Mannheim, Germany-based company, the worlds largest independent lubricant producer, also announced a dividend increase of 1 per performance share.

The company said it generated 58 million in cash flow, despite having transferred 56 million in German pension liabilities to an external pension fund. In addition to this, more working capital had to be financed due to the significant growth in sales, Fuchs explained in February in a preliminary report on performance.

The company expects further organic growth in revenues and earnings in 2012 on the basis that the global economy will develop positively despite the well-known difficulties.

Cortec Expands into Middle East

Cortec launched a new Middle East joint venture with its regional distributor, United Corrosion Technologies, to supply corrosion inhibitors in the region and North Africa. Cortec Middle East will establish service centers in the United Arab Emirates, Saudi Arabia and Jordan and will align with distributors such as The Kanoo Group.

Understanding the unique nature of corrosion challenges in the Middle East, were strengthening our commitment to work closely with the engineering community to mitigate the detrimental effects of corrosion in the Middle East and North Africa, the company stated in February.

Tim Whited, Cortec’s director of corrosion engineering and field services, noted that both the atmospheric and underground environment in the Middle Eastern region promote accelerated corrosion of metals. In many areas the rate of corrosion on metal surfaces exposed to atmospheric conditions is typically accelerated due to the impact of moist, very hot, salt air, Whited told Lube Report. Underground structures such as pipelines… face aggressive corrosion attack in many areas due to the presence of a high groundwater table that is very saline.

According to Whited, Cortec supplies a variety of industries in the region. The company provides oil and gas companies with systems designed to mitigate corrosion on above-ground storage tanks, cased pipeline sections and insulated piping. It also helps companies mothball facilities in order to preserve equipment that is temporarily out of service.

Cortec’s Vapor Phase Corrosion Inhibitor and Migrating Corrosion Inhibitor products, many of which are biodegradable, control multi-metal corrosion in a variety of applications within aggressive corrosive environments. The offerings include a wide variety of lubricants, greases, gear oils and hydraulic fluids.