Mining is a strategic industry in many African countries, contributing billions to the continents economy. The industry operates on tight margins, and effective lubrication of mining equipment is essential to guard against interruptions. Emeka Umejei digs into the sector.

The number of mineral mines is extensive in Africa, a continent that holds about 30 percent of the worlds reserves of ore, according to one industry insider. Mining operations are found in almost every country: digging for iron in Liberia, diamonds in Angola, cobalt in Democratic Republic of Congo, gold in Tanzania and uranium in South Africa, among many others.

The industry is a major contributor to many African economies, generating billions of dollars in revenue for international and domestic mining companies, as well as taxes for governments. For instance, mining contributed 8 percent to South Africas GDP in 2018, according to the state statistics bureau.

Growth of Africas mining industry is estimated to be 4.5 percent per year until 2022, said Patrick Swan, managing partner at lubricant consultancy Aswan Consulting based in South Africa, at the ICIS African Base Oils and Lubricants Conference in Cape Town, South Africa.

Lubricating the Pit

Mining operations take place in extreme environments that are often hot and dusty and occasionally rocked by massive explosions to dislodge the prized material. Oversized trucks transport ton after ton of shattered rock from the face of the mine to equally large pieces of processing equipment.

All this machinery must be effectively lubricated to ensure continuous and safe operations. Moisture, dust, heavy loads, extreme pressures and non-stop operations combine to create a very challenging environment for any lubricant and quickly wear equipment.

Downtime means lost revenue. According to mining equipment supplier Gates, the average cost per incident of downtime is about U.S. $180,000. And a survey carried out by Shell in 2016 found that just over half of operational downtime was attributed to incorrect selection and management of lubrication of mining equipment.

As with many industrial processes, the list of equipment that requires lube is long, from drills and boring machines to mechanical shovels and bulldozers, and from mills to conveyors. This adds up to a substantial need for all types of lubricant, and as the African mining industry grows, so does demand. Swan estimates lubricant volumes required for mining in Africa to be about 165 million liters per year, with hydraulic oils accounting for 45 percent of that, crankcase oils 27 percent, axle and transmission fluids 14 percent, industrial lubes 12 percent and grease 2 percent.

Swan also said that a high volume of hydraulic oil is used in mining often due to leaking hoses ruptured during mining operations. Industrial lube applications include gearboxes, compressors and transformers, while greases are used in pins and bushes, electric motors, open gears, conveyors and pumps.

Barriers to Entry

Dominant suppliers of mining lubricants in Africa include many of the large international players such as Shell, BP-Castrol, Engen and Total, with Chevron (under the Caltex brand), ExxonMobil and independent Fuchs Petrolub following.

Ranjith Ramkissoon, technical director of Umongo Petroleum, a South African supplier and distributor of base oil and additives, told LubesnGreases that multinationals account for more than 90 percent of mining lubricant demand in South Africa, which makes it difficult for newcomers and independents to penetrate the segment.

[There is] growth in the industry, but I dont see it changing too much from majors to small players, agreed Swan, who added, Fuchs is growing [in the mining segment] and the small players can contribute with niche products like open gear lubricants, but otherwise mining is very cost driven.

However, smaller independent lubricant companies can have certain advantages. One is their ability to react quickly to an operators needs. Smaller players have a quicker turnaround time compared with the large volumes produced by bigger operators that would involve larger supply logistics. On the flipside, if an independents oil fails in some way, the financial damages incurred by the mine operator could be crippling, Swan commented. This dissuades many from attempting to enter the market in the first place.

Another barrier to entry is the prohibitive cost of product approval. The leading original equipment manufacturer in the mining sector is United States-based Caterpillar, which saw annual sales of $54.7 billion in 2018. Other players include U.S. builders of diesel engines Cummins and MTU, Japanese heavy plant maker Komatsu and German large equipment manufacturer Liebherr, among others. For transmissions, the segment is dominated by Allison, Funk, General Electric, Voith, ZF and Hydrostatic.

These OEMs require approvals for mining lubricants used in their equipment, and new players entering the segment must undertake an expensive process to acquire these approvals.

Even though we have over 40 independent blenders in South Africa, most of them are small operations with limited capability, technically and logistically, Ramkissoon said.

This is due to several factors. Fewer than a fifth of independent lubricant blenders have a laboratory capable of servicing mines, which can lead to quality control issues, he said. Secondly, small operators offerings are limited to mainstream products while knowledge and expertise in specialty lubricants is lacking, he said.

Thirdly, logistical challenges stem from the inability of independent lubricant producers to supply large volumes and wide range of products demanded by the big mines, Ramkissoon explained. The market perception of independent lubricant producers is that they are not capable of supplying quality products consistently, he added.

On the other hand, Swan said, one route for independent lubricant blenders to acquire approvals is through their additive suppliers.

The additive supplier can give it to you, but you have to guarantee that you use the exact formulations that have been approved. Otherwise you will no longer meet the [OEMs] requirement, Swan said. In some instances, independent lubricant producers, after winning OEM approvals through their additive suppliers, could be tempted to use different formulations because it is cheaper, which may cost such independent producers their continued approval.

Future Trends

Africa is opening up to greater international investment in mining, which is a positive development because as investment scales up the volumes of lubricant used in mining operations will also increase, Swan added. As with many industries, some countries have more modern equipment while others do not, so it follows that demand for higher-specification lubricants will increase as the fleet of huge off-road mining trucks that collect enormous loadsof rock from the blast site is renewed.

That said, it is unlikely that there will be a great deal of change in the supply and demand dynamics of Africas mining lubricant business in the future. This is largely due to the inability of smaller independent players to gain market share in what is ostensibly a closed shop.

The sector will continue to be dominated by the lubricant brands of a handful of major oil corporations distributed through their partners. This pushes independents who want to move into this segment into entering partnerships with the leading major oil corporations.