Mols lube business traces its roots to the Austro-Hungarian Empire when the Vacuum Oil Co. was formed at the beginning of the twentieth century. In 1991, after the fall of the Iron Curtain, the company was renamed Mol, or Magyar Oil. At that time, the companys lubricants business was transferred to its subsidiary Mol-Lub Ltd., a key player in the regional lubricants market of Central, East and Southeast Europe. This region (including Ukraine but excluding Russia) now consumes approximately one million tons of lubricants annually.

Mol produces heavy paraffinic crude oil from wells in Hungarys Pannonian Plain. The company claims a market share of around 60,000 tons, with annual sales revenue of about 90 million.

Central Player

Mol Group operates five fuel refineries in four countries in the region. It also has an 80,000 t/y lubricants production facility and technology center located in Almsfzito, a small village in northwest Hungary near the Slovakia border. It operates a 50,000 t/y blending plant in Zagreb, in neighboring Croatia. Both plants produce lubricants, greases, additives and automotive chemical products. In addition, the company operates 10 storage terminals and 1,700 gasoline filling stations in 11 different countries in the region.

We are present in 40 countries and produce over 600 different types of products. We also offer a wide packaging selection, Akos Nemesnyik of Mol-Lubs product development and technical service department told ACIs European Base Oils and Lubricants conference in Budapest in September. We have a wide network of distribution channels in the region, and our primary markets are Hungary, Czech Republic, Slovakia, Croatia, Romania and Bosnia-Herzegovina.

Following a merger with the Slovak national oil company, Slovnaft, in 2000, Mol transferred all Slovakian lubricant production to its Almsfzito plant, according to Nemesnyik. The plant also offers private label and toll blending services.

Mol holds a small but important portion of the regional lubricants market. The countrys central geographic location provides excellent trade routes to a large number of countries in East and Southeast Europe. For example, Mol lubricants are distributed to a storage terminal in Serbia and sold in 34 gas filling stations. The company has two storage terminals and sells its products in 135 gas stations in Romania, and it has one terminal and 235 sales points in Italy, Nemesnyik said.

Mols biggest presence in the Balkans is Croatia, where the locally operated lube plant supplies the companys products to 439 sales outlets and gas stations. Mol-Lub has its own affiliate companies in Ukraine and Russia. Through local distributor partners, the company sells lubricants in Taiwan, Slovenia, Macedonia, Albania, Bulgaria and Moldova.

Fewer Cars, Fewer Lubes

The Hungarian lubricant market is just a sliver of the markets in Central and East Europe, accounting for 2.2 percent of the regions demand, or almost 70,000 t/y. A number of factors have impacted its growth, according to Mol. The main issue is that since 2008, there has been approximately 5 percent decrease in the total vehicle population in Hungary, and this is bad news, Nemesnyik said. Cars and lorries are aging, and new registrations are low.

The country has room for growth in lubricants consumption because Hungarian car density is one of the lowest in the region at 290 cars per 1,000 people. In comparison, neighboring Croatia has 345 cars per 1,000 inhabitants, and Slovenia has close to Germanys density rate of more than 500 cars per 1,000 people.

Hungary has a few key industry sectors that drive the countrys lube demand, including metallurgy, machinery production, motor vehicle and equipment construction and the chemicals segment, which has a large production of tires, Nemesnyik reported. However, Mol does not expect significant improvements in demand in the foreseeable future. As the European crisis continues, Hungarys economic outlook is not promising because the landlocked country relies heavily on exports to the Eurozone.

In 2012, Hungarys gross domestic product growth rate was negative 1.7 percent, and for the second quarter of 2013 it has shown just 0.1 percent improvement, compared with the same quarter last year, Nemesnyik said. Also, the countrys population is almost 10 million and is shrinking at an average annual rate of 0.2 percent.

Nemesnyik described the countrys lubes market as crowded with over 10 major competitors and over 100 different brands offered for sale. The brands of all well-known multinational oil companies such as BP, Shell, Mobil, LiquiMoly as well as Lukoil and Prista Oil are present in Hungary. Also, OEM-branded oils are widely available at the countrys service stations and workshops. In addition, local retail stores offer private labeled products.

In 2012, Mol held the largest share of the countrys lube market with 19 percent. The second biggest lubricants marketer in Hungary is BP; its flagship Castrol brand held a 13 percent share in 2012. BP was followed by French Total, Italian Eni and Anglo-Dutch Shell, each holding 9 percent of the countrys lube market in 2012.

Smaller players are Hungarian companies Ecool and Helvet (7 and 4 percent share respectively), Bulgarian Prista Oil (3 percent share), German Fuchs (2 percent) and Ciks (1 percent). The remaining 24 percent was divided among smaller regional companies.

Nemesnyik pointed to one interesting characteristic of the Hungarian lube market. Companies that provide fluid management services to the automotive sector also market lubricants and hold a significant 12 percent share of the market.

By product type, automotive lubes held 43 percent share of the countrys market in 2011. The rest was industrial lubricants such as metalworking fluids, circulating oils, compressor lubes, industrial gear oils, process oils, white oils and greases. The total value of the lubricants sold in Hungary in 2011 was estimated at 150 million, while per capita consumption equaled 7 kilograms, less than in other Central and East European countries, Nemesnyik observed.

Hopes for the Future

The companys API Group I base oil feedstock supply for lubricant production comes from its 140,000 t/y Szzhalombatta facility on the Danube River. We also produce smaller batches of Group II base oil, but the main high-quality feedstocks such as Group III base oil, PAOs, other synthetic and naphthenic base oils come from external sources in Europe and Asia, Nemesnyik said.

With its strong links to the export market and automotive production output, the Hungarian lubricants market is expected to stagnate in the short term as the slow recovery from the economic crisis and lower car sales stunt consumption. An important factor will be restructuring of the portfolio because only this can increase the value of lubricant sales, Nemesnyik stressed. He added that Mol is focusing on increased production of bright stock because it is forecast to be in short supply as many European Group I base oil plants are scheduled to close.

The latest trends in lubricant consumption are balanced by the global trends of reduced consumption. Along with longer lubricant lifecycles and tougher environmental restrictions, portfolio diversification is the only good bet for many lube manufacturers, according to Mol.

The future of the Hungarian lubricants market certainly relies on effective customer support, restructuring of sales channels like migration from do-it-yourself to do-it-for-me, as well as an upgrade to the vehicle park, increased fuel prices and increased production output in the Eurozone, Nemesnyik said. He concluded with the notion that price sensitivity is also an important factor. At present, many countries in [Eastern Europe] are [using lower] value oils in high volumes. Customers care more about the products [lower] price and less about its quality.