From 2008 to 2013, the regions market dropped at a rate of 14 percent annually. Since then, it has experienced slight growth of 1.6 percent each year, Zorica Davidovic, head of Belgrade-based Bargos Loa consultants, told LubesnGreases in an interview in March. In the past, lubes were considered highly profitable products; now they have become commodities, Davidovic said.

Ex-Yugoslavia, Then and Now

Looking back, the regions lube market was supported by a healthy economy in the former Yugoslavia, one of the top European economies in the 1980s. Times have changed since then, and the area now comprises seven countries, some of which are still recovering from the countrys bloody breakup in the 1990s. The markets include Slovenia, Croatia, Bosnia and Herzegovina, Serbia, Montenegro, Macedonia as well as Kosovo, an autonomous territory that gained independence from Serbia in 2008.

Until 1990, the former Yugoslav lubricant market was comparable to that of Western Europe, both in terms of quality and consumer demands. Back then, the country consumed around 240,000 tons of lubricants annually. In the past two decades, there have been considerable changes caused by the disintegration of Yugoslavia, wars and the Western sanctions [against Serbia in the 1990s], Davidovic said.

The bloc of countries (excluding Kosovo with its fragile economy), consumed 98,000 tons of lubricants in 2014, according to Bargos Loa. In the same year, Serbia consumed 30,000 tons, followed by Croatia and Bosnia that consumed around 20,000 tons each. In 2014, Slovenia consumed 15,500 tons of lubricants, while the smaller economies of Macedonia and Montenegro consumed 7,000 tons and 4,500 tons, respectively. These numbers include brake fluid consumption as well, Davidovic said.

The consultancy has monitored the regions lubricant market extensively and found that the dire situation in the industry in the last two decades led to the creation of smaller companies that manufacture under suspicious circumstances. In the region [primarily in Serbia, Macedonia and Kosovo], there are dozens of producers that work in an outdated way, with no guarantee of quality, without appropriate professional staff, no labs, no certifications, she said. She added that the industry still suffers from the lack of investment, obsolete equipment and markets closed to the regions production.

The regions leading lube marketers are Serbias Nis and FAM, Bosnias Optima and Tehnosint, Croatias Ina, Slovenias Olma and Macedonias Makpetrol. These companies weathered the gloomy years of civil war and weak economies. At least 80 other brands are available from smaller producers, Davidovic said. The smaller ones such as Adeco, Dinara-Romanija, Altis Chemicals or Bell Chemicals, all from Serbia, recorded either stagnation or a decline in lending, according to the consultancy.

Country Outlook

Serbia is the largest lubricant market in the former Yugoslavia. The country consumed around 100,000 tons of lubricants in the late 1980s. In the following two decades, demand dropped to 45,000 tons, said Bargos Loa, citing data from the Serbian Chamber of Commerce. From 2011 onward, the market decline continued at a rate of 14 percent annually to 30,000 tons consumed in 2014.

The Serbian Chamber of Commerce expects slight growth of 1.6 percent onward. In 2015, lubricant production in Serbia is expected to amount to 15,000 tons. Imports could reach about 30,000 tons and exports around 9,000 tons, Davidovic said.

She added, The countrys lube market feels the pressure of the fierce international competition from global brands. The multinationals have reduced the price of high-quality products, and various regulations hamper domestic lube manufacturers.

The companies dominating Serbias lubricant market, and the wider region as well, are Belgrade-based Nis, owned by the Russian oil major Gazprom Neft, Krusevac-based FAM and state-owned Oil Refinery Belgrade, the oldest lubricant producer in Serbia, established in 1934.

Croatias sole lubricant producer, Ina Oil Co., is one of the largest lube marketers in the former Yugoslavia. In 2009, it employed around 16,000 people, according to Bargos Loa. In 2008, Hungarian oil major Mol became a majority owner of Ina.

In 2013, Mol shut down Inas lubricant blending plant in Rijeka, one of the two lube facilities operated by the company. The other plant is in Zagreb and is the only lube production site in Croatia right now, Davidovic said. In 2014, Ina produced around 9,000 tons of finished lubricants.

Bosnia and Herzegovinas market is dominated by two major lube producers – Rafinarija ulja Modrica and Tahnosint. The former is owned by the Russian oil major Zarubezhneft and produced 14,000 tons of finished products in 2011, according to Bargos Loa.

The Modrica site also features a 65,000 t/y API Group III base oil refinery, the only source of Group II and III in Southeast Europe. In 2015, the company expanded its blending facility and produced 11,000 tons of finished products, according to Modrica. Also, it expects a major revamp of its hydrocracking unit in the coming years.

In 2015, Modricas Russian owner created a new company to distribute finished products. It resulted in a significant loss of market share in Serbia. In addition, they did not succeed in renewing the contract with Nis, so they cannot sell through their gasoline stations. However, they could offset the loss with increased export abroad, Davidovic said.

Bosnian Tehnosint is a medium-size enterprise, with 50 employees and a blending plant with a capacity of 15,000 t/y, she added. In 2014, the plant located in Laktasi produced 3,500 tons of finished products.

Slovenia has one independent lube producer, Olma. At its blending plant in the outskirts of Ljubljana, it produced 9,000 tons of finished products in 2015, according to Bargos Loa. Olma aims to market its products in Southeast Europe, primarily in the former Yugoslavia. To my knowledge, they aim to become the leading manufacturer in the field of metalworking fluids and hydraulic fluids, Davidovic said.

Macedonia is the southern-most country in the former Yugoslavia. It has fractured lubricant manufacturing, with many small producers that hold a portion of the market while most of the country is supplied by imported products. The countrys largest marketer is Makpetrol, a fuel and lubricants distributor with an extensive network of 124 gasoline stations. In 2015, the company supplied the Macedonian lube market with 400 tons of motor and industrial oils, Makpetrol said.

The largest base oil supplier in the Balkan region is the Hungarian oil major MOL, while the only naphthenic suppliers are Nynas and Petronas.

Metalworking Fluids: A Case in Point

The great recession significantly impacted economies in the Balkan region. Consider the case of the declining demand of metalworking fluids, Davidovic explained. These products are a specific and distinctive indicator
of the industrys growth and the general trends related to industrial lubricants. She added that the biggest shock from the economic crisis in the region culminated in 2009 and 2010, when the automotive and shipbuilding industries were devastated.

When the production of passenger cars, trucks and other transport equipment declines, she said, there is a corresponding decline in base metal demand, as well as a decline in various industrial metal products, including lubricants used in vehicle manufacturing. However, the situation has changed in the last couple of years, according to Bargos Loa.

Slovenia and Croatia became part of the European Union, while the other countries were forced to adopt EU legislation such as REACH. The most influential factors are higher demands of original equipment manufacturers and environmental regulations, Davidovic said. We can conclude that in the long term the regions lubricants consumption could stagnate or even increase slightly.