The World Banks 2015 data estimates Moroccos population at about 35 million with a Gross Domestic Product of U.S. $110.6 billion. In the 2016 spring edition of the MENA Economic Monitor Report, the World Bank forecast that the countrys growth would slow to 1.7 percent due to heavy headwinds in the agricultural sector.
However, Moroccos economic prospects are looking up in 2017. The World Banks April 2017 Economic Outlook forecasts a rebound in agriculture that would push GDP growth to 3.8 percent in 2017. The cereal crop is expected to be above its historical average, and agricultural GDP could grow by close to 10 percent. Nonagricultural GDP is also projected to rise slightly above its recent levels due to the agriculture spillover effect and rising confidence of both consumers and producers, the World Bank report acknowledges.
Market Overview
According to Kline & Co., the three major suppliers to Moroccos lubricant market are Total, Vivo Energy and Afriquia, which account for more than 75 percent of market share. Besides these dominant players, Winxco Morocco, a wholly-owned local concern, is also active in the market, with Winxco and Afriquia being the two leading independents in in the country.
According to Karim Ben Hassine, account manager, North Africa, lubricants, additives & chemicals for BRB, the largest end users of lubricants in Morocco include the OCP Group, a global producer of phosphate and its derivatives, the steel industry, the food industry and vehicle repair shops. He added that other sectors of the economy have begun to show significant consumption, including textile, pharmaceuticals and aeronautics.
This observation was supported by Mehrdad Vajedi, director for Dubai-based Permian Energy, who added that textile holds significant opportunity for lubricant demand in Morocco. According to Vajedi, lubricant demand in Morocco is about 110,000 metric tons, amounting to some 5 percent of Africas total lubricant demand. The automotive sector accounts for a large chunk of this demand, followed by the industrial sector.
Morocco is North Africas largest car manufacturer and the second largest in Africa, after South Africa. Vajedi emphasized that some of the factors that make Morocco attractive as an international hub for automotive production in include low labor charges and proximity to Europe.
The North African country has two dominant automotive factories: Socit Marocaine de Constructions Automobiles (Somaca) and Renault Tanger. Renault Tanger is a joint venture between Fipar-Holding (a subsidiary of Moroccan pension fund Caisse de depot et de gestion), which holds 47 percent equity in the venture, and Renault SAS. In addition, Renault bought a 54 percent majority share in Somaca in 2005.
Renault Tangers car factory opened in 2012 and is the largest in Africa. Vajedi noted that Renault Tanger, with a capacity to manufacture 400,000 units per year, has a larger market in Morocco than its Romanian plant has in that country. Aside from Renault, PSA, Volkswagen and Ford are active in Moroccos automotive market, but Renault is the market leader.
BRBs Ben Hassine explained that Moroccos lubricant production increased following the construction of new blending plants by Winxo Morocco and OiLibya Morocco. Winxo Morocco has increased its production from 9,000 to 30,000 tons, Afriquia Akwa Group produces around 40,000 tons and OiLibya has increased production to 20,000 tons, he said.
These estimates agree with Klines report on the Moroccan market, which estimated the total demand for consumer automotive lubricants in Morocco at 29,000 tons in 2015. According to Kline, the largest share of demand comes from engine oils, including passenger car motor oils, passenger car diesel engine oils and two-wheeler engine oils. These oils account for more than 70 percent of the total consumer lubricant volume. They are followed by gear oil, with about 13 percent, grease and automotive transmission fluids.
The Kline report noted that all new car models recommend SAE 15W-40 or lower viscosity grades. Smaller car models tend to require 15W-40, while larger vehicles require 10W-40 and lighter grades. Lower viscosity grades, such as 10W-40 and 5W-40 synthetic oils, are growing particularly fast as European OEMs bring in new models that comply with EU standards, the report stated.
While Group I is still the leading base oil in Morocco, there is a consensus among stakeholders that the market is looking toward higher grade oils such synthetic and Group III. The highest demand is Group I with an amount of Group III, but Group II is not enjoying traction in the market. The main local production is semisynthetic 10W-40 with Group III or full synthetic. Group II is still not being used in local production, said Ben Hassine.
Permians Vajedi said he does not see synthetic making large inroads in Morocco because the lubricant market is significantly traditional. There is not much room for fully synthetic lubes. Also, higher cost will hinder the shift to synthetics, he said.
Klines research supports these views, and its report notes that the growth of synthetics in Morocco is still very limited compared to that in developed markets. In Morocco, the use of synthetic lubricants represents 11 percent of the total consumer market, and semisynthetics account for 12 percent. International companies such as Vivo Energy and Total are the largest promoters of synthetic lubricants. The role of these suppliers and their promotional campaigns has been crucial to the increased use of synthetic lubricants, the report found.
Shift to Better Lubes
Stakeholders generally agree that Moroccos lubricant market is shifting to higher grade oils such as synthetics and Group III in response to growing automotive manufacturing in the country. Permians Vajedi explained that 290,000 vehicles were manufactured in 2016, and the trend is positively upward. This will definitely cause a quality shift in engine oils.
However, he added that the growth will be gradual. After the Samir refinery shut down, he said, there was an anticipation that imports of higher API group base oil would increase. However, we still have not seen a big shift in product mix toward higher quality base oils.
According to Vajedi, Moroccos lubricant market is expected to grow 2.5 percent annually, which he noted is above average and mostly. Most of this growth will occur in the automotive segment.
BRBs Ben Hassine noted that new blending plants in Morocco are geared toward serving West Africa, which could mean more growth for the market. Klines report corroborates this view, forecasting that the consumer automotive lubricant market in Morocco is expected to grow at a compound annual growth rate of 2.3 percent by 2020, increasing from an estimated 29,000 tons to more than 32,000 tons. According to the report, the trend is based on an anticipated improvement in the national economy and efforts to modernize the car population, which include complex regulations on the importation of second-hand vehicles.