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Need to Know


Its the second-largest country in the world, with borders that span six time zones and stretch nearly one-quarter of the way around the earth. It has one-third of the worlds freshwater supply and more than enough deposits of natural gas to make it self-sufficient in energy.

In addition, its an affluent, bilingual multicultural nation with some of the coldest temperatures and warmest people on earth. You bet, Im talking about Canada. Its high time to put in a good word for my neighbors up north – and speak about their lubricants business.

To start, common wisdom has it that Canada probably consumes about 10 percent as much lubricants as the United States, because Canada has a population of approximately 32.8 million, or roughly 10 percent of the U.S. population of 295.7 million.

Considering that the United States consumes some 2.8 billion gallons of lubricants a year in total and Canada gobbles up an estimated 317 million gallons, 10 percent turns out to be a fairly good estimate. But Canadas lubricants business deserves more respect than to be referred to simply as a percentage of the United States. Such generalities tend to ignore the fact that the Canadian lubricants business has unique qualities and characteristics.

Start with a look at this markets size and segmentation. As stated above, Canada consumed an estimated 317 million gallons of lubricant in 2005. Passenger car engine oil – necessary to satisfy the appetite of the countrys nearly 18 million passenger cars – leads in demand with an estimated 85 million gallons, or 27 percent of the total.

Now here is a fact that gets glossed over in the 10 percent of the U.S demand assumption: Canada is a global leader in the transition to lower-viscosity grades of passenger car engine oils. Its demand for 0W-30, for example, is already an estimated 23 percent of the total, and 5W-30 accounts for roughly 45 percent. Engine-block heaters or not, the cold temperatures in Canada favor the use of low-vis engine oils. This in turn moves the country more quickly into lubricants with superior fuel economy.

Heavy-duty engine oil is the second-leading lubricant consumed in Canada. Demand for HDEO reached an estimated 60 million gallons in 2005, or 19 percent of the market. Here too, lighter-weight multigrade viscosities tend to be favored more than in the United States due to Canadas colder temperatures.

Process oils are the third-leading product segment in Canada. These include rubber oil, electrical oil, ink oil, white oil, agricultural spray oils, and other paraffinic and naphthenics oil used in manufacturing products. All told, demand for these lubricants reached an estimated 55 million gallons, or 17 percent of the total.

That sketches the biggest segments on the demand side of the business. The supply side is dominated by three leading majors: Imperial Oil, Shell Canada and Petro-Canada. These three account for nearly 60 percent of all the lubricants supplied to Canadian users. The balance comes from BP, Chevron, Valvoline, Irving Oil, Boss Lubricants, D.A. Stuart, Quaker Chemical and a number of others.

Imperial Oil (an ExxonMobil affiliate) is the largest supplier of lubricants in the Canadian market, with sales estimated at roughly 30 percent of the total. Shell Canada and Petro-Canada command an estimated 16 percent and 13 percent, respectively.

Each of these suppliers manufactures lubricant base stocks, as well. Whats more, Petro-Canada not only produces base stocks, but was the first to produce some of the highest-quality base stocks in North America. The companys Mississauga, Ontario, base oil plant (originally built by Gulf Canada) is capable of cranking out a combined total of roughly 12,500 barrels a stream day of API Group II and III base stocks. Beyond serving the Canadian market, these base stocks go into finished lubricants and white oils sold into the U.S. Market.

So thats a thumbnail of the Canadian lubricants business, and some of its key differences with the United States. But there is more to consider.

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