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Slowly, The Worlds Lube Thirst Grows

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Global lubricant demand will grow at less than 2 percent per year to reach 42.1 million metric tons by 2017, consultancy Kline & Co. projects, from 38.7 million tons in 2012.

In a December webinar, George Morvey, industry manager for Klines Energy Practice, noted that more than half of the worlds lubricants in 2012 came from just 10 companies. Shell yielded a bit of ground yet remained the global market share leader, at 12 percent of lubricants supply, followed by ExxonMobil at 10 percent, BP at 7 percent, and Chevron and Total with 5 percent each. Filling out the Top 10 are PetroChina at 4 percent, Sinopec with 3 percent, and Japans Idemitsu, Russias Lukoil and Germanys Fuchs Petrolub at 2 percent each. This marks the first time that Fuchs has landed on Klines list of the worlds Top 10 lubricant suppliers.

According to Klines latest study and forecast, Global Lubricants Industry: Market Analysis and Assessment, lubricants demand will grow annually from 2012 to 2017 by 2.7 percent in Asia- Pacific, by 2.4 percent in South America, and 1.4 percent in Africa and the Middle East. Virtually stagnant growth rates are expected for Europe (0.6 percent a year) and North America (just 0.4 percent annual growth).

By region, Asia-Pacific led the market in 2012 with 43 percent of finished lubricants consumption. North America was next with 25 percent, and Europe with 17 percent. The remainder included Africa and the Middle East together at 8 percent, and South America with 7 percent.

Drilling down to individual countries, the United States remained the leader with just under 22 percent of the

global market. The U.S. continues to lead in terms of overall lube demand, but we are contracting, Morvey said. There are still issues [with] trying to recover from recession, increasing the penetration of synthetics, fewer miles driven and longer oil drain intervals. All of these things combined have resulted in shrinking of lube demand.

The number two country market, China, consumes almost 20 percent of the worlds lubricants now, and is expected to take the top spot globally in the 2015 to 2016 timeframe. India is third with more than 5 percent of the global market. Russia passed Japan to become the fourth largest country market, but each has less than 5 percent of the global total.

In China, the government is trying to develop a consumption economy rather than an export economy, Morvey pointed out. People are still buying cars, theyre still driving. Its the same with India. Despite the misfiring of those two country markets, we still see fundamental drivers in place. Demand will resume growth over the forecast period, albeit at much lower growth rates than prior.

Growth in South America, and in Africa and the Middle East is driven primarily by commodity exports to Asia and domestic consumption, he said. The slowdown in China trickled down to country markets in South America and Africa-Middle East that were sending commodity exports to China. The fundamentals are in place

there, albeit at lower growth rates.

In Europe, the lubricants markets of Eastern and Central Europe are key, he noted. Growth in Russia, Ukraine, Turkey, Romania – countries like these will counter declines in Western Europe, Morvey said.

Despite whats happening in Italy, France, Spain and Greece, he added, we do see positive drivers in Eastern and Central Europe. Although like South America and Africa-Middle East, a lot of these country markets are exporting products into Western Europe, so if theres a decline in Western Europe, it trickles back into Eastern and Central Europe.

Looking at how global demand breaks down by lubricant types, heavy-duty engine oils led with 23 percent of global lubricant demand in 2012, followed by passenger car motor oil at 18 percent.

We do see oil drain intervals are increasing in certain country markets, regardless of usage levels, Morvey said. In the U.S., fleets for example are looking to optimize oil drain intervals to keep vehicles and equipment out on the roads rather than in the shop. In different country markets – depending on the level of sophistication, age of the fleet and best maintenance practices – they may not be following extended oil drain intervals.

Kline, which is based in Parsippany, N.J., pegged global heavy-duty motor oil demand at 9 million metric tons in 2012, and expects it grow to 10.5 million metric tons by 2017. The most encouraging trend for HDMO, Morvey indicated, is the shift from monogrades to multigrades, and a gradual turning away from heavy-vis grades like 20/25Ws towards lighter 10W and even 5W weights. He noted that monograde demand in Africa-Middle East, South America and Asia-Pacific is expected to remain high over the forecast period until those regions replace older vehicles and adopt more effective preventive maintenance programs, all of which will enable longer oil drain intervals.

Other automotive-related lubricants, such as automatic transmission fluid, automotive gear oil and tractor hydraulic fluid, account for another 12 percent of global demand.

On the industrial side, process oils (a category where Kline gathers products such as transformer oils, rubber oils, white oils and printing inks) led with 15 percent of total global lubricants demand in 2012.

Other key industrial products include hydraulic fluids at 9 percent, general industrial oils (such as industrial gear oils, turbine oils, compressor and refrigeration fluids) with 8 percent, industrial engine oils at 7 percent, and metalworking fluids at 5 percent. Lubricating grease accounts for 3 percent of the global market.

Kline projects synthetic lubricants will grow at an annual rate of about 4.5 percent over the next 10 years, albeit from a small base.

Several factors are driving the increased use of synthetics, Morvey said. One is the expanding use of synthetics by original equipment manufacturers for factory and service fill in consumer vehicles in North America. Examples include Toyota and Honda (which favors 0W-XX multigrades), GM (Dexos 5W-xx), Ford, Chrysler/Fiat and Subaru (which recommends both 5W and 0W multigrades).

In China, Kline says, semi-synthetic passenger car motor oil is finding increased acceptance in mid- and top-tier vehicles at acceptable prices. Mass-market OEMs, like Maruti-Suzuki, Hyundai, Tata, Ford and General Motors, are all progressing towards greater use of synthetic PCMO, via the marketing efforts of franchised dealers, leading multinational corporations, and recently Indian Oil Corp. Synthetics have become established in Indias premium- class vehicle market, for OEM brands such as Skoda/Volkswagen, Mercedes, BMW, Audi and Volvo.

Among industrial oils and fluids, Kline projects that demand for extended oil drain intervals, lower operating temperatures, reduced downtime and efficiency improvements will drive the penetration of synthetic lubricants

across all markets.

Morvey said the most promising industrial opportunities for synthetics include the power generation, transportation and food processing industries, thanks to strong growth foreseen for these sectors. That includes synthetic gear oil and grease in wind turbines, synthetic turbine oil for aviation and power generation, synthetic natural gas engine oils, and compressor and refrigeration fluids.

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