For some, this instills hope about the regions ability to cope with the regulation. But one observer warns that the hope could prove false. Stephan Baumgaertel, execu­tive director of the German Lubricant Manufacturers Association, contends the biggest impact for the lubes industry will come next year with the next phase of the legislation.

According to an ancient Mayan prophecy, the world will end on December 21, of this year. Most likely, this will not happen. A more recent divination predicts that diversity of lubricants in Europe will end on May 3, 2013. This is clearly a worst-case assumption. However, the industry should be prepared for the second phase of the REACH registration process because it could yield the legislations most disruptive impacts to date.

Landmark Chemicals Regulation

The acronym REACH stands for Registration, Evaluation and Autho­rization of Chemicals in Europe, an enormous multi-phase regulation in­tended to protect humans and the environment from chemical hazards. What does this mean to industry and consumers?

Some chemicals are dangerous for people and the environment, while others are less dangerous or even harmless. Many thousands of chemicals are manufactured and used, but complete sets of toxicological and ecotoxi­cological data are available for only a portion.

Historically, only chemicals in regular contact with humans and/or the environment have been tested. Many havent been tested since there is no exposure to them (except for accidents and misuse), and others did not raise concerns, since they were recognized as nontoxic.

However, there were a number of bad surprises in the past, because hazardous properties were discovered after long periods of high-volume use. Too late, chemicals such as asbestos, benzene, chlorofluorocarbons (CFCs) and others were found to have caused diseases, including cancer, or serious environmental problems.

In order to minimize risks associated with chemicals, the European Commission adopted a program to investigate the eco/toxicological properties of all chemicals manufactured in the European Union or imported into the EU, regardless of their use. (A small number of exceptions were allowed, for example, polymers and substances used to manufacture intermediates.) It is now the duty of manufacturers and importers to evaluate the properties of substances at their own cost and provide the results (this is registration) to the European Chemical Agency.

ECHA decides, based on the submitted data, if further tests are necessary. For some chemicals posing higher risk, so called substances of very high concern, ECHA may restrict use and limit the conditions of use. SVHC users have to notify ECHA about the use and explain why the substance cannot be replaced. This process is called authorization.

To assess the risk of using chemicals and to help users to avoid those risks, the manufacturer or importer must provide not only toxicological data, but also (and this is key for understanding the impact of REACH on the lubricant industry) information about safe handling and use of the chemicals, based on exposures of a certain nature and period. That is, the prescribed handling procedures should apply to a specific method of application and address the amount of time that a worker will be exposed to the material. This information must be passed on through the supply chain all the way to the ultimate user.

Furthermore, the manufacturer or importer must recommend protective measures, for example use of exhaust ventilation for chemicals that are sprayed, which gloves to wear (in case of skin contact) and 34 what personal protection set should be used. The purpose of this is to enable the industrial user to do a proper risk assessment at a workplace level.

Administrative Expense

At a first glance, REACH sounds like a good idea and indeed, many other regions in the world started similar programs to assess the risk of chemicals. What, then, is the problem for the lubricant industry?

First of all, REACH does not respect the normal handling and use of substances. The legislation requires data to be generated – even, lets say, for unusual uses and misuses. For example, if a lubricant is applied by spraying (by the way, there is no definition of exactly what spraying means), the ingredients must be tested if the airborne particles generated by spraying are dangerous for human health.

The second step would be to recommend protective measures such as local exhaust ventilation (LEV). It is not sufficient to demand an LEV in the first place; the manufacturer or importer must generate data assessing the inhalation risk of the substance and then demand an LEV, which must limit the workers exposure below the derived no-effect level (DNEL). DNELs are the exposure levels at which negative effects are expected to occur and are based either on calculations with very conservative assumptions or on test data.

This is only one example showing that REACH generates a lot of costs and problems. While REACH was a good idea, adoption became an enormous bureaucratic burden, especially for small and medium sized companies, so-called SMEs. A recent EC study revealed that technical progress has slowed down as research and development resources are partly deployed to compliance activities such as data generation and compilation.

Impact on Additives

What does this mean for lube manufacturers, and why is 2013 so important for the lubricant industry?

High-volume substances (defined by the legislation as those that are manufactured or imported – by individual suppliers – in volumes exceeding 1,000 metric tons per year) had to be registered in 2010. This deadline applied to much of the base stocks consumed in the E.U., and nearly all of them have been registered. Furthermore, many of them are base chemicals going into a very wide variety of products, so nearly all applications had been considered for registration.

The situation is somewhat different for the next registration phase, which applies to substances with volumes ranging between 100 and 1,000 t/y. These substances must be registered by May 31 next year. It is very likely that a lot of lube additives will sit in that range. Unfortunately, there is no obligation to register, and hence manufacturers and importers may decide on May 31 to cease supplies. Some will not announce their decision before that date in order to cash in until the last moment. Today, many suppliers reassure that they will stay in the market and support all uses, but some are reluctant to state this in writing. It is, of course, difficult for them to guarantee the supply of a chemical in the future since no one knows the future needs nor the legislative and marketing implications.

Manufacturers and importers may continue to supply but exclude certain uses. Despite the principal registration of a substance, some applications (for example, use in metalworking fluids that are sprayed) might be excluded. The rationale of choosing this course might be cost, a company might find during the data generation process that it is not possible to handle the substance safely in certain applications.

Such considerations are especially pivotal with dual-use substances; the high-volume use (perhaps as an ingredient in paint) will be registered, but the small-volume applications (say, in a metalworking fluid) may not be. In particular, spraying of forming lubricants could become a key issue since the tests for inhalation studies are quite expensive while the volumes of several substances in those finished products might be rather low.

In order to simplify description of the uses of chemicals in lubes, the Technical Association of the European Lubricants Industry (ATIEL) and the Technical Committee of Petroleum Additive Manufacturers in Europe (ATC) have proposed standardized categories of principal uses. (See the categories at: http://atiel.org/reach/exposure-scenarios) Basically, the idea is to classify all lube application into six categories and then to develop general exposure scenarios and safety measures for each category. The objective is to offer everyone in the lubricants supply chain a standardized format for their exposure scenarios and standardized language and terminology for use in filling out the required documents.

Chemical suppliers, lubricant manufacturers and lube users only have to choose among the six categories to determine necessary procedures for safe handling. This is not rocket science, and at the end of the day, ATIEL and ATC may call for the same safety measures followed today: wear gloves, wash hands, etc. But this time those recommendations will have been generated with enormous effort.

Most substances will be still available next year, but the number of suppliers may decrease. This may impact the volumes available on the market and therefore influence price negotiations. Specifically, the import of chemicals from other regions in the world, working as a buffer for local production is jeopardized, as the sale of a chemical, for example by a reseller on a spot basis, requires a full registration which cannot be completed quickly.

What happens if a particular chemical additive ceases to be supplied in Europe? Lube additive companies often supply their products in packages – a variety of chemicals addressing different performance properties combined in a base fluid diluent. Typically there are numerous packages with slight variations to accommodate specific demands of different customers.

Should a chemical manufacturer or importer cease to supply one of the ingredients to these packages, the additive company will search for a replacement. If they can procure the same chemical from another supplier, replacement is relatively simple. But if they are forced to turn to another chemical that will help the finished lubricant achieve the same performance, may be a complicated exercise, as the replacement chemical(s) may interact different with other ingredients in the package. And if the original package was part of a lubricant that met an industry or original equipment manufacturer specification, the new formulation will likely be required to undergo reapproval – an expensive prospect for products such as automotive engine oils.

What to do?

Of course, the obvious thing is to ask for a written assurance that the supplier will continue delivering the substance after May 31, 2013. In most cases, such a promise is unlikely to be granted unless the lubes manufacturer also guarantees that it will buy the substance for some time in a certain volume at a certain price, allowing the manufacturer of the substance to calculate costs and risks of a registration. Only robust commercial cases will be sustainable.

In such situations it is an obvious idea to look for a second or even for a third supplier. Here is another trap which is linked to REACH, but also to our globalized world: manufacturers tend to build bigger plants in order to lower manufacturing costs. At the end of the day, only a very few facilities in the world will be left to manufacture certain chemicals, while other suppliers buy these chemicals and sell them under their own brand with a different name (private label). It could also happen that a number of manufacturers and importers rely on the same facility. In case of an accident at the production site, all suppliers run out of the substance.

This happened, for example, in 2011 in a fatty alcohol factory, one of two such facilities in the world. From one day to another, there was a shortage of certain emulsifiers made of these alcohols. Another example was the earthquake in Kobe 1995, when the word experienced a shortage of certain electronic elements due to the destruction of some factories. Procurement officials should make sure that their suppliers are sourcing from different manufacturing facilities and are not delivering out of the same vessel.

To summarize, the next registration phase of REACH could mean that the number substances as well as the number of suppliers will decrease. The reliability of existing supplies is questionable, but at the same time the SDS becomes more complex. It is quite impor­tant to identify more than one supplier for critical raw materials and keep them informed about the use. The ATIEL/ATC categories will help lube manufacturers to continue their business and make REACH workable.