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A Sizeable Footprint


Synthetics share of the 35 million metric ton global lubricants market is expected to grow from 10 percent in 2009 to 12.5 percent by 2019, according to a new study from Kline & Co., driven by OEM technical demand for synthetics and growth in high-quality base oils.

We feel the synthetic and synthetic blend category is a category thats poised for growth, when many other product categories are showing declines, some of them significant, said Geeta Agashe, vice president of Kline & Co.s energy research practice in Parsippany, N.J., during a web presentation April 5. All marketers can see this space is going to grow, so theyre trying to think of various ways and means they could capture a significant share of this part of the market.

By 2014, Kline projects full synthetics and semi-synthetics together will account for 11 percent of a global lubricant market which is estimated to total 40 million metric tons by then. Synthetic lubricants included in the study were those made with esters, polyalkylene glycol, polyalphaolefin, API Group III, phosphate esters, silicones and others.

For the purposes of its study, Agashe emphasized, Kline did not base its definition of synthetic lubricant on base stock type, chemistry or manufacturing process, but on how the lubricant manufacturers market or position the product to the end user. So Group III lubricants in most parts of the world, except Germany, are considered synthetics, for example. Other examples of how synthetics have penetrated the market are Ford Motorcraft motor oil, which calls itself a semi-synthetic, and the AC Delco formula for General Motors trademarked Dexos1 motor oil, also a self-declared semi-synthetic.

On the industrial side, about 8.5 percent of the 15.8 million metric tons of lubricants consumed in 2009 consisted of synthetics, up from 8.1 percent in 2007, according to Kline. In the commercial automotive lubricants category, synthetics accounted for 5.4 percent of the 10.5 million metric tons demand in 2009, up from 4.8 percent in 2007. Synthetics made up 19.3 percent of 8.8 million tons global demand in the consumer automotive lubricants market in 2009, compared to 18.1 percent in 2007. The synthetics figures include both full- and semi-synthetic lubricants, Agashe said.

Increased availability of high-quality base oils plays a key role in increasing the total size of the synthetic lubricants pie. Essentially what thats done is give [original equipment manufacturers] the confidence that they can recommend a 0W product, a 5W product, in any part of the world, and theres going to be adequate supply for the finished lubricant marketers to meet the demand in their country, she explained. So many of the OEMs are now moving towards global specifications.

The Kline study, Global Synthetic Lubricants 2010: Market Analysis and Opportunities, found the European region to be the largest consumer of synthetics by volume, with synthetic lubricants accounting for 22.2 percent of total lubricants consumption in 2009. In North America, synthetic lubricants demand hit 10.8 percent in 2009. And in the Asia-Pacific region, the synthetic lubricant share of total lubricants demand reached 6.4 percent in 2009, it found.

The Top Line

To put synthetics demand into context, Agashe outlined the studys top-line findings about the overall lubricants market. In 2008, global finished lubricant demand reached 38.3 million tons, she said, then fell 8.5 percent to about 35 mil-lion metric tons in 2009. The market clawed its way back up to 36.3 million tons in 2010, which was a 7 percent improvement over 2009 but obviously not yet fully recovered.

Nor was the pain shared evenly around the world, Agashe said. Some countries weathered the recession better than others, some were badly impacted, and some to date show no signs of recovery. It could take two or three years more before demand comes back to earlier levels, on a global basis. And as it recovers, lubricant sales will be seen shifting to growth markets like Asia-Pacific, and away from markets such as Europe where consumption was shrinking before the recession.

Forty-five percent of the 2010 volume demand was industrial lubricants, including industrial, process oil and marine lubricant applications. Commercial automotive lubricants accounted for 30 percent of the total, and the remaining 25 percent were consumer automotive lubricants. In all cases, the 2010 volume was still off significantly from 2008 demand.

Consumer Automotive

Products sold as synthetics and semi-synthetics accounted for about 22 percent of global passenger car motor oil consumption in 2009.

Europe is the largest consumer of synthetic passenger car motor oils and has the largest synthetic penetration, Agashe said. Full- and semi-synthetic passenger car motor oil accounted for more than 50 percent of Europes PCMO demand in 2009, Kline found. For Europe, whats interesting is that theyre not limiting the synthetic recommendation just to premium or high-performance cars, but we also see mass-market vehicles recommending use of synthetics. There is consumer demand for extended oil drain intervals, lower maintenance costs and environmental benefits.

Changes in North America are expected to give rise to greater demand for synthetics. Examples include Toyota and Honda recommending 0W multigrade motor oils for their 2011 models, along with General Motors introduction of its Dexos1 motor oil specification.

Nearly 20 percent of PCMO demand in Asia-Pacific consisted of synthetic types in 2009, Kline found. Agashe noted that General Motors sells more cars in China than it does in the United States. As these OEMs are sending more vehicles outside of North America, outside of Europe, we are going to see increased demand for synthetics and synthetic blends come from the emerging parts of the world, Agashe said. We really feel theres going to be a big change in many, many emerging parts of the world, transforming their needs from using monogrades to high-viscosity [15W] multigrades, and then from that leapfrogging many generations right to 5W or even 0W.

In Africa and the Middle East, theres a certain part of the population driving premium cars, such as Mercedes and BMW, and they are really expected to create increased demand for synthetics, Agashe noted. These regions in 2009 were not very important consumers of synthetic PCMO though, because their harsh driving conditions compel drivers to change their oil more frequently, so theres less incentive to use synthetics, she pointed out.

Commercial Automotive

Synthetics and semi-synthetics accounted for about 5.4 percent of heavy-duty motor oil demand in 2009, according to the Kline study – a far cry from the 22 percent share they enjoy on the light-duty side.

While Europe, and then North America, are the leading regions in synthetics penetration on the HDMO side, thanks to their support for a modern and well-maintained fleet, Klines study found it remains difficult to convince owners/operators and fleet managers about the synthetics value proposition.

Kline did uncover some opportunities for synthetic HDMO among those whose equipment needs to run 24 hours a day, seven days a week, such as for harvest season or at some mines. We really feel in this category, there seems to be more opportunity in light commercial vehicles and for commercial vehicles that are fitted with diesels, Agashe said.

She noted that factors such as poorly maintained fleets, significant use of monograde oils (which are 40 to 80 percent of the market) and harsh operating conditions make it tough for synthetics to grow on the heavy-duty side in parts of Asia-Pacific, Africa, the Middle East and South America. Drivers in these regions prefer more frequent oil drain intervals as cheap insurance against dust, dirt and contaminants, Agashe said. Synthetic has not caught on, and the future doesnt look as exciting as it does on the PCMO side of the business, in those areas, she added.


About 8.5 percent of global industrial lubricants demand in 2009 consisted of synthetics and semi-synthetics, Klines study found; thats up slightly from 8.0 percent of the market in 2007.

From an industrial standpoint, Europe and North America are the leading regions in terms of demand for industrial synthetic lubricants, Agashe said. Some of the factors driving that include requirements of modern equipment, advanced technology, improvements in management practices, and environmental and government regulations. Synthetic lubricants are necessary in key situations, according to Agashe, citing examples such as when using a lubricant near a source of water, or fire-resistant oils in certain types of transformers.

In Asia-Pacific, she said, that is less of a factor. We do see a lot of modernization of equipment, with a significant export focus, Agashe said. Especially a country like China, wherein local consumption is not as high, but theyre producing a lot of goods and services for the rest of the world. In order to meet the quality requirements, they have to import more sophisticated equipment that really needs to use synthetic formulations.

She noted that automotive production is moving into the Asia-Pacific region. The number of cars and trucks being produced in China and India today is growing significantly, which means greater use of metalworking fluids, Agashe said. And as these countries try to emulate maintenance practices as followed in the West, we see greater interest in biodegradable products and also in synthetic products.

Agashe pointed out that in South America, there is really not a big market for industrial synthetics except in Brazil. Because it produces a lot of cars, and produces a lot of mining equipment, machinery and agricultural equipment, we are seeing greater interest in Brazil, she commented.

Buyer Perception

The consumer perception part of the study revealed some key reasons why synthetics share of market grew when other products – including semi-synthetics – declined.

People who use synthetics in their automobiles were doing so for a couple of reasons, Agashe said. One was when a consumer owned a high-performance car where the original equipment manufacturer recommended use of a synthetic. The owners of high-performance vehicles tended to be not as badly impacted by the recession, she noted. Theyve invested a lot of money in their vehicles. They are true believers who absolutely believe in the power of synthetics and want to continue using them.

The semi-synthetic motor oil market was more heavily impacted by the worldwide recession in recent years, Agashe noted. We found out people who were using synthetic blends are not really the true passionate loyalists, who are loyal for a particular brand or particular product quality, she said. They were folks who once in a while when it felt good, got something better – a synthetic blend priced between conventional and full synthetic. These are the people who, when the economy went into the doldrums, chose to go back to buying conventional products.

Looking ahead, the Kline analysis indicates synthetics are transitioning from premium products into products with broader appeal. In the developed world this is due to demand pull, Agashe said, and in the emerging world its due to supply push – including the increased availability of API Group III and III+ base oils. Growing Group III supply also encourages automakers and other OEMs to specify synthetics.

The big drivers on both the automotive and industrial side are OEM recommendations, fuel economy and emissions mandates, global economic activity, and marketing and promotional actions by synthetic lubricant sellers.

Among the most promising industrial niches for synthetics, where performance will help drive growth, are synthetic gear oils and greases in wind turbines, synthetic turbine oils for aviation and power generation, synthetic natural gas engine oils, compressor and refrigeration fluids. These will benefit Group III, IV and V, Agashe stated.

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