Global lubricant demand will grow at less than 2 percent per year to 42.1 million metric tons by 2017, Kline projected, from 38.7 million tons in 2012. According to the companys study, Global Lubricants Industry: Market Analysis and Assessment, lubricant demand will grow annually from 2012 to 2017 by 2.7 percent in Asia Pacific, by 2.4 percent in South America, by 1.4 percent in Africa and the Middle East, by 0.6 percent in Europe and by 0.4 percent in North America.

Asia-Pacific led the market in 2012 with 43 percent of finished lubricants consumption. North America was next with 25 percent and Europe with 17 percent. The remainder included Africa and the Middle East together at 8 percent and South America with 7 percent.

Among individual countries, the United States remained the leader with just under 22 percent of the global market. The U.S. continues to lead in terms of overall lube demand, but [it is] contracting in terms of [its] demand, Morvey said. There are still issues trying to recover from recession, increasing the penetration of synthetics, fewer miles driven and longer oil drain intervals – all of these things combined have resulted in shrinking of lube demand.

China consumes almost 20 percent of the worlds lubricants now, and is expected to take the top spot globally in the 2015 to 2016 timeframe. India is third with more than 5 percent of the global market. Russia passed Japan to become the fourth largest country market, with each country having less than 5 percent of the market.

In China, the government is trying to develop a consumption economy rather than an export economy, Morvey pointed out. People are still buying cars, theyre still driving. Its the same with India. Despite the misfiring of those two country markets, we still see fundamental drivers in place. Demand will resume growth over the forecast period, albeit at much lower growth rates than prior.

Growth in South America, Africa and the Middle East is driven primarily by commodity exports to Asia and domestic consumption, he said. The slowdown in China trickled down to country markets in South America and [Africa and the Middle East] that were sending commodity exports to China. The fundamentals are in place there, albeit at lower growth rates.

In Europes lubricants market, Eastern and Central Europe are key, he noted. Growth in Russia, Ukraine, Turkey, Romania – countries like this will counter declines in western Europe, Morvey said. Despite whats happening in Italy, France, Spain and Greece, we do see positive drivers in Eastern and Central Europe. Although like South America and Africa-Middle East, a lot of these country markets are exporting products into Western Europe, so if theres a decline in Western Europe, it trickles back into Eastern and Central Europe.

Market Demands

Looking at the break- down of global demand by lubricant types, heavy-duty motor oil led with 23 percent of global lubricant demand in 2012, followed by passenger car motor oil at 18 percent. We do see oil drain intervals are increasing in certain country markets, regardless of usage levels, he said. In the U.S., fleets for example are looking to optimize oil drain intervals to keep vehicles and equipment out on the roads rather than in the shop. In different country markets – depending on the level of sophistication, age of the fleet, and best maintenance practices – they may not be following extended oil drain intervals.

At the 2nd African Base Oils and Lubricants Conference in Cape Town, Morvey identified the major countries driving lubricant demand growth, several of which are in Africa and the Middle East.

Besides volumetric growth, quality levels are also improving, offering opportunities for all industry players. The continuing global migration to lower viscosity PCMO will result in higher penetration of synthetics and semi-synthetics, and, conversely, longer drain intervals and lower overall PCMO demand, Morvey remarked.

Kline found that the use of lower viscosity PCMO varies considerably by country. The U.S. will remain a 5W-20/30 market as OEMs continue to specify these viscosity grades, noted Morvey. Demand for 5Ws in China will grow rapidly as new vehicle sales and the overall car parc expands. Consumption of higher viscosity grades in Brazil will limit the penetration of synthetics.

Most encouraging for heavy-duty motor oil is the shift from monogrades to multigrades, and the move from heavy viscosity grades like 20/25Ws to 10Ws and 5Ws. Monograde demand in Africa-Middle East, South America, and Asia Pacific will remain high over until these regions undergo a replacement of older vehicles and adopt more effective preventive maintenance programs, including oil drain intervals, Morvey said.

Other automotive-related lubricants, such as automatic transmission fluid, automotive gear oil and tractor hydraulic fluid, account for another 12 percent of global demand.

On the industrial side in 2012, process oil – a category where Kline includes products such as transformer, rubber, white oils and printing inks – led with 15 percent of total global lubricants demand. Other industrial products include hydraulic fluids at 9 percent, general industrial oils – such as industrial gear oils, turbine oils, compressor oils and refrigeration fluids – with 8 percent, industrial engine oils at 7 percent, metalworking fluids at 5 percent and grease at 3 percent.

Growth for Synthetics

Kline projects synthetic lubricants will grow at an annual rate of about 4.5 percent over the next 10 years, albeit from a small base. Improvements in quality levels will accelerate the penetration of synthetics and semi-synthetics. OEM factory fill and service fill recommendations and owners desire for longer drain intervals are key drivers for synthetic demand, Morvey said in Cape Town.

Strict fuel economy, emission regulations and new engine technology developments are potential drivers for greater use of synthetics in heavy-duty engine oils among OEMs and end users, Morvey said. They will shift from SAE 15W-40 to 10W-30, 5Ws and 0Ws in selected applications. However, opportunities for synthetic heavy-duty oils vary by country, driven by many factors such as fleet age, owner-operator, fleet sophistication, maintenance and multigrade/monograde splits.

He added that end user [fleets] are more amenable to the value proposition offered by synthetics despite higher cost. Synthetic PCMO is progressing toward the mass market with OEMs in India and through marketing efforts by franchised dealers, leading multinationals and, recently, India Oil Co. Ltd. Also, synthetics are established in premium class autos – Skoda/VW, Mercedes, BMW, Audi, and Volvo.

Licensed ATFs (e.g., Dexron-VI, Mercon LV, ATF+4) are being formulated with API Group III base oils and poly alpha olefins. There are opportunities here for lube suppliers and additive companies, primarily in factory fill applications, Morvey said.

Kline estimates that dual-clutch transmissions will account for 5 million units globally by 2015, displacing manual transmissions and negatively impacting demand for automotive gear oil.

Driveline fluids continue favoring synthetics as OEMs promote extended drain intervals through extended warranty coverage. Added benefits of this move include fuel economy gains, reduced downtime and lower maintenance costs, said Morvey.

In the industrial arena, Kline predicts that demand for extended drain intervals, lower operating temperatures, reduced downtime and improved efficiency will drive the penetration of synthetics across all markets. Most promising are power generation, transportation and food processing industries, noted Morvey. In addition, there will be increased use of synthetics in gear oils and greases in wind turbines, turbine oils in aviation and power generation, natural gas engine oils and compressor and refrigeration lubricants.