The oft-spoken statement that there is a large demand for [API] Group I is highly misleading, Stephen Ames, managing director of SBA Consulting, contends. Why should there be a large demand for the lowest quality base oil? Rather, says Ames, there is a large demand for what the lowest quality implies: low price or, more to the point, cost effectiveness.
There is indeed great demand for cost effective base oils in every application, but they are not necessarily Group I, Ames says. Group II has proven to be highly competitive and cost effective, and should become more so as new capacity is streamed.
A major migration is now occurring away from Group I, Ames told the ICIS Pan-American Base Oils meeting. With the closures and reduced throughput that would bring base oil supply and demand into balance by 2017, Group I capacity could fall as low as 32 percent of total base oil capacity. As recently as 2010, Group I accounted for 58 percent of global capacity. The trend isnt new, but it will gather speed over the next five years as over 9 million metric tons per year of new Group II capacity becomes available.
Many Group I plants, he notes, were built in place of diesel production. Those in Europe are now out of sync with their fuels market, and are forecast to become much more so.
Ames predicts that Western Europes Group I capacity will plummet from 6.2 million t/y in 2011 to 2.3 million t/y in 2017. In Central and Eastern Europe, he expects Group I capacity to fall from 4.8 million to 1.4 million t/y in the same period. Even the Middle East and Africa will lose Group I capacity: in those regions it will drop from a combined 3 million t/y to 2.2 million t/y. The Americas and Asia-Pacific will each lose about 2 million t/y of Group I capacity.
Tim Sullivan and all our colleagues at LubesnGreases Europe – Middle East – Africa join me in wishing you a healthy and prosperous 2013!
– Nancy J. DeMarco
nancy@LNGpublishing.com