Additive Companies Influence Lube Development
Speaking at a seminar on the Global Finished Lubricants Value Chain during the Base Oil & Lubes Middle East 2016 conference in April, Agashe said that intercompany technical discussions are vital because they provide the opportunity to guide new category development. After all, Agashe related, additive companies have a better view than most on technical evolution.
Additive companies also liaise with original equipment manufacturers on several levels and in multiple ways. And if the OEM is global, the liaison is also global, she added.
Although additive companies have significant interaction with OEMs, they usually have no direct business with manufacturers. Business development generally includes promoting additive packages on the basis of various technical and commercial benefits, the localization of products, cosponsoring formulation development and developing test data to support marketing claims.
The industrial market is more diffuse, but projects include improving durability and efficiency, providing biodegradable and food grade lubricants, reformulating to accommodate the use of API Group II and III or rerefined base stocks and reformulating to reduce brightstock use.
Despite their sphere of influence, additive companies generally are not interested in participating in the finished lubricants business, Agashe claimed. They do not want to compete with customers and do not possess the distribution capability or brand building capacity. However, in some cases, niche products are blended by additive companies for their lubricant company customers.
The base oils and finished lubricants landscape is changing rapidly, but emerging base stock suppliers provide additional revenue opportunities for additive companies. In particular, restrictions on Group III viscosity grade read-across and base oil interchange make it important to focus on market and formulation development. According to Agashe, Group III marketers sponsor formulation development and testing to provide a quick ramp-up in sales once a plant is commissioned.
Beside this, there is support for new areas including low-viscosity SAE 5W-20 heavy-duty engine oil because they likely require Group III base stock. The support also extends to testing, and although there are no direct benefits, additive companies cannot afford to be left out, she said.
Globally, the additive industry has morphed into two categories – component suppliers and package blenders. Component suppliers compete in specific technology and chemistry niches. In contrast, package blenders have in-depth knowledge of OEM needs, providing the ability to make compromises that balance cost and performance. The latter approach demands big sales volumes to justify a return on the significant investment.