Much of that has to do with OEM technical demand, new vehicle sales in Asia-Pacific, and industrial and commercial equipment modernization, George Morvey, industry manager for Klines energy practice, said during a mid-June web presentation. The widespread availability of API Group III base oil is another key factor, he said, noting that these stocks are moving into the automotive space and driving growth in synthetics and overall industry growth.

Morvey explained that synthetic lubricants covered in the study included those formulated with API Group III, Group III+ (gas-to-liquids), Group IV (polyalphaolefins) and various Group V base stocks (a catch-all category which includes esters, polyalkylene glycols, polybutenes and other types). The studys use of the terms synthetic and semi-synthetic are not dependent on base stock type but on how lubricant manufacturers position the product to end users: If they call it synthetic, it is. He also reminded that while semi-synthetics contain a portion – usually 20 to 30 percent – of such base stocks, there is no generally accepted cut-off.

Overall, Klines study found Europe had the largest synthetics consumption by volume, at 28 percent of the regions total lubricants consumption in 2013. In North America, synthetic lubricants penetration reached 15 percent in 2013. In Asia-Pacific, 10 percent of total lubricant demand consisted of synthetics, South Americas reached 7 percent, and Africa and Middle East together saw just 4 percent.

Consumer Automotive

The consumer automotive segment is setting the most peppy pace for synthetics, which accounted for 26 percent of this global 9.4 million ton market in 2013. Synthetics penetration into the industrial segment was 12 percent, but they were just 6 percent of commercial automotive lubricants demand worldwide last year.

Zooming in to North America alone, the penetration of synthetic products in passenger car engine oil demand reached 23 percent in 2013, including 16 percent for full synthetics. The United States had the highest estimated synthetic penetration in its consumer automotive lubricant demand at 24 percent, followed by Canada at 20 percent, and Mexico with 9 percent.

Wholesale conversions of their factory- and service-fill motor oils from conventional to synthetics by leading North American automakers such as General Motors, Toyota and Honda have increased the demand for synthetics, Morvey said. While North Americas car parc is a mix of performance, luxury, premium and mass-market vehicles, they and other OEMs have strong ideas about motor oil technology.

These volume OEMs really move the needle in terms of synthetic penetration, and we expect that to continue as more and more of these types of OEMs convert either fully or partially to synthetic depending on their engine platforms, he noted. Certainly we are seeing longer oil drain intervals, and more vehicles equipped with oil-life monitoring systems. In some cases, if you follow the system, the car might need an oil change once a year. With some German imports, that could be 14, 15, 16 months before getting an oil change. Those OEM factors are pushing the extended oil drain intervals and in turn creating demand for synthetics.

Much of this demand is spurred on by professional installers such as quick lubes, car dealers, garages and franchised workshops, Morvey observed. In fact, to varying degrees synthetic motor oil sales in every country mainly go through do-it-for-me channels. Within the installed channels, more of the product is being consumed and pushed through the OEM franchise workshops, he said. In countries where they might have an older parc, people are using installed or independent workshops rather than franchises.

Mechanics and technicians play a significant role in influencing the customers choice of lubricant. Vehicle owners look to those folks who are the expert to make the brand and product selection, and lot of them are doing that over an OEM-approved brand list, he pointed out. A lot of the promotional activity we see in certain country markets is really directed to that decision-maker, as opposed to the vehicle owner.

Commercial Automotive

On the commercial automotive lubricants side, which is dominated by heavy-duty-engine and gear oils, Kline projects synthetics will capture 7 percent of a 13.9 million tons global market in 2023. Thats a handsome gain from the 6 percent of 11.9 million tons demand seen in 2013. However, North America currently has only 4 percent penetration of synthetic products in its heavy-duty engine oil demand, with half of that being full synthetics. (Compare that to Europe, where synthetics and semi-synthetics are almost a quarter of HDEO sales, and North Americas penetration looks slack indeed.)

By country, Canada had North Americas highest estimated synthetic penetration in its commercial automotive lubricant demand at 9 percent in 2013, followed by the United States with 5 percent, and Mexico at 3 percent.

Its an uphill battle to convince equipment owner-operators and fleet managers of synthetics value proposition, Morvey cautioned. For preventive maintenance programs, scheduled and optimized, right now a Group II product meets those fleets needs to extend oil drains and maximize maintenance programs, he pointed out. So its a challenge – almost door-to-door marketing, talking to decision makers, and trying to convince them to move to synthetics. We think the opportunity for synthetic engine oils is more in the light commercial vehicle category and consumer vehicles: passenger cars, pickups and minivans used in commercial applications like rentals and taxis.

Industrial Lubes

In the industrial arena, about 12 percent of the 12.2 million tons of lubricant demand in 2013 was synthetics. Kline forecasts this market to grow to 13.9 million tons in 2023, including an impressive 16 percent for synthetics. Last year, North America was one of the leaders in synthetics penetration for this segment: 16 percent, including 12 percent for full synthetics.

Kline found that Mexico had North Americas highest share of synthetics in its industrial lubricant demand, at 20 percent, followed by Canadas 18 percent and the United States with 16 percent.

It also found synthetic penetration varies by industry. Certain industries just have a higher appetite for synthetics for a whole host of reasons, Morvey said. Big consumers include aviation, power generation, metals processing, textiles and the transportation equipment industry.

He pointed out that in aviation, synthetic is really the only option. In power generation, as more wind turbines are installed on or offshore, demand will rise for synthetic gear oil in gearboxes and for synthetic grease. Metal processing, transportation and equipment industries will also remain attractive markets for synthetics, he said.

However, barriers to entry can be high. Industrial OEMs wield strong influence on the lubricant type and even brands used, through their approvals programs and equipment manuals. Many require lubricants to undergo specialized tests and field trials as well, which can be costly and difficult to arrange.

Whos on Top?

Globally, Kline placed ExxonMobil in the number one spot among suppliers of fully synthetic finished lubricants, with an estimated 18 percent of the total. Others in the worlds top five included BP (11 percent), Shell (9 percent), Total (5 percent) and Fuchs (5 percent). Twelve percent of the market is shared by the next five companies, and a wide variety of other suppliers claim the remaining 40 percent.

In North America, ExxonMobil led the market in supplying fully synthetic finished lubricants, with 24 percent, Kline said. Trailing were Shell (10 percent), Valvoline (9 percent), BP (8 percent) and Calumet (3 percent). Additional key players vying in this arena included Total, Fuchs, Chevron, Phillips 66 and Petronas, and scores of others.

Morvey reminded that synthetic lubricants sell for a premium price, and stressed that they require a high level of marketing and promotional activity. In newer markets, for example, price sensitivity can be an obstacle, so end users must be educated in the value proposition of synthetics. ExxonMobils Mobil 1 line of synthetic lubricants sets a good example, Kline found, because it maintains a consistent message and one that is easily recognized regardless of region or country market.

Klines report is titled Global Synthetic Lubricants 2013: Market Analysis and Opportunities.