Much of that has to do with OEM technical demand, new vehicle sales in Asia-Pacific, and industrial and commercial equipment modernization, George Morvey, industry manager for Klines energy practice, said during a web presentation in June. The widespread availability of API Group III base oil is another key factor, he said, noting that it is moving into the automotive space and driving growth in synthetics and overall industry growth.

By 2017, Kline projects full synthetic and semisynthetic lubricants together will account for 15 percent of a global lubricant market estimated to reach 35.2 million metric tons by that year. According to Morvey, synthetic lubricants covered in the study included those formulated with Group III, Group III+ (gas-to-liquids), Group IV and various Group V base stocks. He noted that while semisynthetics contain a portion – usually 20 to 30 percent – of such base stocks, there is no generally accepted cut-off.

Klines study found Europe had the largest synthetics consumption by volume, at 28 percent of the regions total lubricants consumed in 2013. In North America, synthetic lubricant penetration reached 15 percent in 2013. In Asia-Pacific, 10 percent of total lubricant demand consisted of synthetics. South Americas synthetics penetration reached 7 percent, while Africa and Middle East together saw just 4 percent.

Including process oils, Europe accounted for 17 percent (6.7 million tons) and Africa-Middle East for 8 percent (3.1 million tons) of 39.2 million tons of global lubricant demand in 2013, Kline estimated.

Consumer Automotive

Synthetics are projected to account for 33 percent of 10.9 million tons global demand in the consumer automotive lubricants market in 2023, up from 26 percent of 9.4 million tons demand in 2013. In Europe in 2013, the United Kingdom had the highest synthetic penetration in its consumer lubricants demand at 81 percent, followed by Poland (80 percent), Russia (77 percent), Turkey (76 percent), France (75 percent), Germany (73 percent), Benelux (64 percent) and Italy (61 percent). Among countries in the Middle East and Africa, Egypt leads with 7 percent.

Wholesale conversions from conventional to synthetic motor oil by carmakers such as Toyota, Honda and General Motors have increased the demand for synthetics. These volume OEMs really move the needle in terms of synthetic penetration, and we expect that to continue as more and more of these types of OEMs convert either fully to synthetic or partially depending on their engine platforms, he noted. Certainly, we are seeing longer oil drain intervals and more vehicles equipped with oil life monitoring systems. In some cases, if you follow the system, the car might need an oil change once a year. With some German imports, that could be 14, 15 or 16 months before getting an oil change. Those OEM factors are pushing the extended oil drain intervals and in turn creating demand for synthetics.

Morvey said that synthetic motor oil sales are handled mainly by do-it-for-me channels in all markets. Within the installed channels, more of the product is being consumed and pushed through OEM franchise workshops, he said. In countries where they might have an older parc, people are using installed or independent workshops rather than franchises.

Mechanics and technicians play a significant role in influencing a customers choice of lubricant. Vehicle owners look to … experts to make the brand and product selection, and lot of them are doing that over an OEM approved brand list, he pointed out. A lot of the promotional activity we see in certain country markets is really directed to that decision maker as opposed to the vehicle owner.

In Europe, Kline found the penetration of passenger car synthetic engine oil was driven by several factors, including established OEM technical demand in both premium and mass market vehicles, consumer demand for extended oil drain intervals, lower maintenance costs and environmental benefits. Morvey said synthetics demand in Africa and the Middle East is mainly from South Africa, the United Arab Emirates, Saudi Arabia and Egypt. While the synthetic demand depends on the premium and imported car parc, about 47 percent of passenger car engine oil demand in Africa-Middle East is monograde, Kline found. Factors dampening demand for synthetics in Africa-Middle East include older car parcs, price sensitivity, preference for shorter oil drain intervals, low consumer awareness of synthetics benefits and older API service categories.

Commercial Automotive

On the commercial automotive lubricants side, Kline projects synthetics to account for 7 percent of a 13.9 million ton global demand in 2023, up from 6 percent of 11.9 million tons in 2013. Europe had the highest synthetic penetration in its heavy-duty engine oil demand in 2013 at 24 percent, including 6 percent synthetic and 18 percent semisynthetic.

If you look at Europe, especially Western Europe, the country markets there tend to support a modern and well-maintained fleet, Morvey said. Extended oil drains are preferred, but right now conventional products with Group II formulations are meeting those needs.

He noted that it is difficult to convince owner/operators and fleet managers about the synthetic value proposition. Light commercial vehicles and consumer vehicles in commercial applications may present more opportunity, he said.

In Europe in 2013, Germany had the highest estimated synthetic penetration in its commercial automotive lubricant demand at 56 percent, followed by Benelux (26 percent), Russia (25 percent), the United Kingdom (17 percent), France (16 percent), Poland (16 percent), Italy (13 percent and Turkey (10 percent). Among countries in Africa and the Middle East, Egypt led with 1 percent synthetic penetration.

Morvey noted that fuel quality and economics play important roles in the selection of synthetics. For example, European fleets traveling into Eastern Europe have reported poor fuel quality that forces them to change the oil more frequently and, in effect, negates the benefits of synthetics, he said.

One key issue in the commercial space is the effort to convince owner-operators and fleet managers of the synthetic value proposition. For preventive maintenance programs, … a Group II product meets those fleets needs to extend oil drains and maximize maintenance programs, Morvey pointed out. So its a challenge – almost door-to-door marketing – talking to decision makers, and trying to convince them to move to synthetics. We think the opportunity for synthetic engine oils is more in the light commercial vehicle category and consumer vehicles – passenger cars, pickups, and minivans used in commercial applications like rentals and taxis.

Industrial

On the industrial side, about 16 percent of the projected 13.9 million tons of industrial lubricants consumed in 2023 is expected to be synthetics, up from 12 percent of 12.2 million tons in 2013. Europe, along with North America, is a leading region in synthetics penetration. Kline found key factors included OEM approvals and recommendations for synthetics, fit-for-purpose applications, modern equipment, advanced technologies, processes, maintenance programs, extended oil drain intervals, environmental and government regulations.

In Europe in 2013, Germany had the highest estimated synthetic penetration in its industrial lubricant demand with 32 percent, followed by Italy (18 percent), the U.K. (17 percent), France (17 percent), Turkey (12 percent), Russia (12 percent), Poland (10 percent) and Benelux at 8 percent. Among countries in Africa and the Middle East, Egypt had the largest synthetics penetration in industrial lubricant demand at 4 percent.

Kline found synthetic penetration varies by industry. Certain industries just have a higher appetite for synthetics for a whole host of reasons, Morvey said, including aviation, power generation, metal processing, transportation and the equipment industry. He pointed out that in aviation, synthetic is really the only option. In power generation, as more wind turbines are installed on or offshore, demand will rise for synthetic gear oil in gearboxes and for synthetic grease. Metal processing, transportation and equipment industries will also remain attractive markets for synthetics, he said.

ExxonMobil had the top estimated market share among suppliers of full synthetic finished lubricants in Europe at 18 percent, Kline said. It was followed by BP (16 percent), Shell (10 percent), Fuchs (8 percent), Total (7 percent), Petronas (3 percent), Valvoline (2 percent) Chevron (1 percent) and Phillips 66 (1 percent). Many other supplies accounted for the remaining 34 percent.

ExxonMobil also had the top estimated market share among suppliers of full synthetic finished lubricants in Africa and the Middle East combined, at 12 percent. It was followed by BP (9 percent), Total (7 percent), Shell (6 percent), Fuchs (5 percent), Petronas (4 percent) and Chevron 2 percent). Many other companies accounted for the remaining 55 percent.

Klines report is titled, Global Synthetic Lubricants 2013: Market Analysis and Opportunities.