Historically, growth in finished lubricant demand has always been a major driver for lubricant additive consumption. In 2014, global sales of lubricant additives reached an estimated 4.2 million tons. This amounted to 11 percent of the global finished lubricant market, which reached around 39.4 million tons in the same year, according to a Kline and Co. study.
Heavy-duty and passenger car engine oils, as well as metalworking fluids, are the top applications for lubricant additives. These sectors account for about 75 percent of total additive consumption, Gabriel Tarle, Klines senior analyst, energy practice, told the Global Business Clubs Russia and CIS Base Oils and Lubricants conference in Moscow in May.
Dispersants, viscosity index improvers and detergents are the top three functional classes, accounting for nearly three-quarters of the global additive market, he said. Other widely used products are antiwear, antioxidant, corrosion inhibiting, emulsifier, friction modifier and extreme pressure additives.
Tarle is based in Klines office in Prague, Czech Republic. Kline and Co. headquarters are in Parsippany, New Jersey, U.S. The consultancy expects global finished lubricants demand to stay flat at a 1 percent compound annual growth rate, hovering at around 40 million tons by 2019. In 2014, Africa and the Middle East showed the largest annual growth at 3 percent. Asia-Pacific growth was 2 percent, while South American, European and North American finished lube markets each grew by 1 percent or less.
Slow Growth
Since 2010, the global lube additives market has grown at 1.8 percent annually sparked by lube demand growth and the transition to higher quality levels, according to Kline. Metalworking fluid additive demand showed strong recovery between 2012 and 2014, following a decline from 2008 to 2012. Demand declined in all product categories except for PCMO and MWF, Tarle said. He noted that from 2012 to 2014, cumulative annual growth rate for MWF additives was almost 7 percent.
In the last decade, Lubrizol has held the dominant position as the worlds largest and most authoritative lube additive supplier. It is followed by Infineum, Chevron Oronite, Afton Chemicals, Chemtura and BASF. Smaller players include Croda, DOG Chemie, Dover Chemical, Evonik and Rhein Chemie.
Kline found that the lubricant additives industry has two types of participants – package blenders and component suppliers. For component suppliers, production comprises around 90 percent of the total estimated cost; for package blenders, production accounts for only 70 of the total estimated cost. For both additive industry participants, the remainder of the costs are consumed by application support and sales, distribution and administration.
In the last few years, the main change driver for the lubricant additive market has been overall lube demand growth. In the automotive engine oil segment, new quality levels are focusing on compatibility with emission control devices and with ultralow sulfur diesel, biodiesel and ethanol, Tarle said. Other important factor are fuel economy demands for passenger cars and, more recently, for heavy commercial vehicles, as well as extended drain intervals and engine oil life.
On the other hand, in the metalworking fluids industry, the key formulation drivers are regulatory pressure to eliminate harmful chemicals, new machining techniques and use of vegetable oils and oleo chemicals. The three main regulatory bodies currently influencing the lubricants business from a health and safety perspective are the European Unions REACH (Registration, Evaluation, Authorization and Restrictions of Chemicals), the United States Environmental Protection Agency and the Globally Harmonized System for Hazard Communication (GHS).
The impact of REACH is widely known because it came into force in June 2007, whereas the impact of GHS has yet to be assessed, Tarle said. He added that product categories like general industrial oils have fewer components and are not affected as much as MWFs, which comprise a large number of chemical components.
REACH requires all chemical substances in the European market to be registered by 2018, while GHS sets product labeling requirements. Meanwhile, in January 2015, the EPA issued two options to chlorinated paraffin producers: Stop selling medium- and short-chain chlorinated paraffins (C18-C21) immediately, or do not to sell them after May 31, 2016. However, in September 2015, the EPA delayed the ban on chlorinated paraffin until mid-2017, Tarle said.
Viscosity Grade Shifts
Kline expects global passenger car motor oil viscosity grades to shift to more 5W-XXs and 0W-XXs in the coming years. In 2009, 5W grades comprised around 30 percent of the total market for PCMO, and we expect them to grow to around 40 percent in 2024. On the other hand, 0W grades were virtually nonexistent in 2009, and they could comprise 5 to 10 percent of all marketed PCMO in 2024, Tarle observed.
The share of 10Ws, 15Ws and other PCMO viscosity grades could remain the same in the future. Kline also found that viscosity index improvers and dispersants dominated PCMO applications in 2014.
Heavy-duty viscosity grades such as 15Ws and 20Ws are expected to have the same market share in the near future. The 0W HDMO grades are expected to increase from around 7 percent in 2014 to around 12 percent in 2024, according to Kline. As in the PCMO product niche, viscosity index improvers and dispersants dominated HDMO applications in 2014.
Kline said changes in the base oil supply to higher quality products such as API Group II/ II+ and Group III/ III+ base oils are driving changes in additive formulations as well. We expect a drastic change in the global base stock composition, where Group II and Group III base oils will flood the market by 2024, while Group I base oils will relinquish their dominant position by the same year, Tarle said. The share of naphthenic base oils is going to stay virtually the same for years to come, according to the consultancy.
Kline expects overall additive growth to exceed finished lubricant growth in the future due to the transition to the higher quality levels recommended by regulators and original equipment manufacturers. Global finished lubricant annual growth rate is expected to be about 1 percent by 2024, but global additive annual growth rate could amount to 1.5 percent by the same year, the consultancy said.
Antioxidants, viscosity index improvers, dispersants and friction modifiers will experience stronger than average growth due to an increase in treat rates. Antiwear, extreme pressure additives and detergents will experience lower growth because their use is being restricted due to various factors, Tarle said.
In concluding the presentation, Tarle said that additive companies are the crucial link in meeting the business and development goals of all market participants. They work in close collaboration with automotive lubricant marketers as well as automotive and industrial OEMs to develop new categories to meet emission control and fuel economy goals. In addition, they support product development, product extension and customization as well as marketing claims, and they increase additive pack durability to help extend drain intervals.
In the industrial lubricant product category, additive makers and lube marketers need to improve durability and performance, develop environmentally benign products such as biodegradable oils, reformulate to allow the use of Group II and III base oils and develop additive packages that help offset the bright stock shortage. They should also develop additive packages that will work with emerging base oils, such as gas-to-liquid base stocks and other unconventional and rerefined base stocks.