While Turkeys lubricant market has sustained growth, it is still marred by illicit base oil trade despite a government crackdown, a Turkish oil industry association official told Argus European Base Oils Markets Conference in March in Istanbul. Last year, the country’s total lubricant consumption reached 416,000 tons, up 2 percent from 2012, according to Niyazi Ilter, secretary general of Petder, a Turkish oil industry association.
The growth was driven by the country’s economic recovery from the 2008 financial crisis and annual growth in gross domestic product since 2010.
The bottom line is that the Turkish market was oversupplied by a total of 3.5 million tons of base oil and lubes between 2009 and 2013. The excess products likely went to the black market and were consumed illegally as diesel fuel.
Turkey has a large number of lubricant blenders, Ilter noted. Although the number of blenders increased to 311 at the end of 2011, it dropped during the last two years because of the crackdown on base oil smugglers and illegal sale of diesel fuel. As of December 2013, the number of blenders had dropped to 255.
Petder found that the total nameplate blending capacity of licensed lube makers is about 4.5 million tons per year. Although the country’s annual finished lubricants consumption is less than 10 percent of that amount. In 2013, Turkish automotive lubricants sales accounted for 50 percent of the market, amounting to 210,000 tons, Ilter said. Industrial lubricants accounted for 38 percent, or 157,000 tons. Marine lubricants and greases accounted for around 6 percent each, or 24,000 and 25,000 tons respectively.
Turkeys automotive lubricant sales decreased 3 percent in 2013, but industrial oil sales increased 9 percent, compared to 2012. The fall in automotive lubricant sales is explained by the longer drain intervals and introduction of high quality lubricants. The rise in industrial oil sales is a result of big investments in hydroelectric dams and a fast-growing construction sector, Ilter said.
In 2013, automotive engine oils comprised 83 percent of total automotive lubes sales or 176,000 tons, while gear and transmission oils accounted for 7 percent, or 34,000 tons, according to Petder. Of engine oil consumption, commercial vehicles consumed 124,000 tons, passenger cars 49,000 tons, and motorcycles 3,000 tons.
In the industrial segment, hydraulic oils led with a 69 percent, followed by process oils (29 percent) and transformer oils (15 percent). The rest went to metalworking fluids (9 percent), gear oils (8 percent) and others (27 percent).
In 2013, imports of finished lubricants amounted to almost 114,500 tons, up from 95,000 tons the year before. The country has seen a significant increase in finished lube exports, which amounted to 174,000 tons last year, up from 135,000 tons in 2012.
In 2011, Turkey imported over one million tons of base oils, Petder found, quoting Turkish Statistical Institute data. Turkey imports base oils in such high volume because base oils are taxed at a lower rate than other petrochemicals such as gas oil or fuels. This encourages the illicit practice of many market players who mix base oil with diesel and sell it as fuel, Ilter said.
Turkeys base oil imports increased considerably from about 600,000 tons to more than one million tons between 2009 and 2011. Since then, the government has banned shipments and closed tank storage for the numerous base oil consumers that dont have licensed facilities to blend lubricants.
Because of this enforcement, Turkeys base oil oversupply dropped by an average of 35,000 tons per month by December 2013. Last year, base oil imports totaled 744,000 tons, according to Petder. But it [oversupply] has not ended. Toward the end of last year, due to the new supply regulations related to nonfuel products, [base oil oversupply] slightly increased and again dropped rapidly in early 2014, Ilter said.
Turkey has one base oil plant operated by oil major Tupras. With 400,000 tons per year nameplate capacity, the API Group I plant, located in Izmir, produced 154,000 tons of base oil in 2013. This was much less than in preceding years – 380,000 tons in 2011 and 266,000 tons in 2012.
Petder expects the Turkish lubes market to grow in the future, driven by the countrys growing economy. Despite the problems, the eight million unit vehicle park and growing manufacturing and construction sector will drive the countrys lubricant market. It is promising especially because it is a vehicle- and industrial lubes-dominated market.
The future looks brighter if the government succeeds in rooting out smugglers … and if it enforces regulations against unfair competition by using a new licensing regime and improved standards. We hope that the lubricants industry – which has been undervalued because of illegal and illicit activities — will find its well-deserved place in Turkey, as everywhere else in the developed world, he concluded.