Ships based in the Middle East and India consume 9 percent, leaving North and South American vessels to lift less than 4 percent of the global supply, she said.

Valued at $5 billion, this is a challenging market to plumb because most consumption takes place on the high seas, not within country borders. UniMarine evaluates demand by where the vessels originate.

For marine lubricants, you evaluate the yearly consumption of the vessels owned by the ship owners of the considered country market, for instance China, Huot told LubesnGreases. The consumption for each vessel is lifted worldwide but it corresponds still to a Chinese-company-owned vessel. The only way from a commercial point of view to assess a market size is to aggregate the consumption of all vessels for the same market, irrespective of where such consumption is lifted.

Trends for Shippers

At a recent industry meeting in Amsterdam, Huot observed that nine of the worlds 15 largest shipping companies now are based in Asia. The top 10 alone includes six Asian shipping companies, according to other industry sources: Evergreen Marine Corp. of Taiwan; China Ocean Shipping Container Line (Coscol), China; South Koreas Hanjin Shipping Co.; Nippon Yusan Kabushiki Kaisha (NYK) and Mitsui O.S.K. Lines Ltd. (MOL), both of Japan; and Orient Overseas Container Line, China.

Speaking at the ICIS/ELGI Industrial Lubricants Conference in November, Huot highlighted the major trends having an impact on global shipping:

Consolidation among operators, especially in the tankers and container ship segments.

Shifting trade flows to and from emerging markets, where growth is still significant. For example, bulkers are plying the waters of Indonesia, Australia, Africa and South America for commodities heading to China, while more petroleum product tankers are steaming from U.S. ports.

Super-long-stroke engines. These have spread from the tanker segment into the whole market, and present particular challenges for lubricants when combined with slow steaming, a popular tactic for saving fuel.

Eco-friendly designs seem to be more popular, but ship financing is missing in many cases. This may allow private equity firms to strengthen their position within the shipping industry, Huot believes.

Emissions regulations and restrictions are spreading, creating huge issues in supply of both fuels and lubricants.

On the lubricants side of the table, the market for marine lubes is dominated by five European and U.S. suppliers. BP with its Castrol Marine Lubricants business is the leader, with 25 percent of the global market, Huot said, followed by ExxonMobil, Shell, Totals Lubmarine and Chevron.

Marine lubricants are a profitable business, she added, going on to identify 14 other independent firms and alliances that are pushing to increase sales. The Asian based competitors include PetroChina and Sinopec in China, CPC Corp. and Feoso of Taiwan, Malaysias Petronas, South Koreas SK Lubricants, and Singapore-based UniMarine. Others making the list are Aegean Marine Petroleum, Lukoil and Repsol in Europe; Indias Gulf Oil; Oryx Energies and Misr Petroleum in Africa; and Petrobras in South America.

Some newcomers have ambitious goals but lack strategy, she said. The most important requirement for success in the marine market, she added, is to attain a global reach. To reach critical size a global [marine lubricants] player should have the capability of federating local initiatives into a global network and to conciliate all parties interests to fill in supply gaps, she said.

Shippers Shopping List

Shipping companies require a secure supply worldwide, wherever they sail, and 85 percent buy their lubricants under contract; spot purchasing is minimal. The vast majority use only OEM-approved lubricants, Huot emphasized, and three- to five-year contracts are typical, with prices quoted in worldwide ports.

These are technically astute and demanding customers, she indicated. Their engineering departments closely watch lubricant performance and expect regular follow-up and technical value-added from the supplier. They want their lube suppliers to operate blending plants, research facilities and used oil analysis laboratories, and to formulate products that assure compliance with regulations such as the emissions mandates of MARPOL Annex VI. Lube sellers also need close relationships with engine builders, to maintain customer confidence and comfort, and with their own upstream supply chain, to exercise cost control on behalf of ship operators.

Credibility is based on peoples experience and past achievements, not just on corporate [reputation] or brands, Huot stated.

Customers also expect good ports coverage worldwide plus familiarity with all local regulations and logistics. Because ships sail round the clock, 24/7 service is expected, supported by adequate equipment such as trucks and barges. Vessels are costly assets, Huot stressed.

The shipping industry is also facing a serious shortage of skilled workers: According to an International Maritime Organization survey, 83,000 people are expected to depart the industry in the next three years. This could spell an opportunity for lube companies. Lubricant suppliers must compensate for this fact with on-board technical assistance, she suggested.

Ideally, shippers would like to carry one grade of marine cylinder oil on board – like a universal SAE 50 viscosity oil with a base number of 55 to 60 – but thats becoming problematic, too. Such oils are unlikely to satisfy all the emission control mandates, operating conditions, engine designs and desired oil feed rates that shippers see around the globe.

One Oil Wont Do

Emission Control Areas, set up by the IMO to reduce pollution at sea, just became stricter on Jan. 1, 2015, with only 0.1 percent sulfur fuel allowed for ships operating in Europes North Sea and Baltic Sea. As UniMarine advised its clients, this means any product burnt in these areas will be a DMA gas oil with 0.1 percent sulfur maximum (unless a ship is equipped with scrubbers or can burn liquefied natural gas). There may be a 0.1 percent sulfur fuel oil available, but we are yet to be convinced of the quality of this product or its stability, Huot said.

Marine fuel sulfur limits dropped Jan. 1 to that same 0.1 percent for vessels within 200 miles of North American coasts, too. Elsewhere, many ports require visiting ships to burn only low-sulfur fuel, and various waters impose a 0.5 percent fuel sulfur limit or will by 2020.

From 2020, the worldwide limit for sulfur on all marine fuels will be reduced to 0.5 percent, Huot said to LubesnGreases. There is a review to be concluded by 2018, and if there is insufficient availability of the required product this change could be delayed until 2025.

Oxides of nitrogen are also in the regulatory cross-hairs, and marine diesel engines installed on ships constructed on or after Jan. 1, 2016, will be required to comply with the stringent Tier III NOx standard, when operated in a designated NOx ECA.

All this means that a ship could burn two, three or more types of fuel during a journey – each with a different harshness and needing a different cylinder oil. Despite this, ship operators also seek reduced feed rates for cylinder oil, below 0.6 grams/kilowatt hour.

Could we soon need to have four grades of cylinder oil on board? Huot pondered in her Amsterdam presentation. First, scratch that universal BN 55-60 oil. Most ships will need a low-BN 40 and a high-BN 100 to fight the added wear and cold corrosion issues created by slow steaming. Those with older engines, or that encounter increased feed-rate environments, might also carry a classic BN 70. And operators will then need a BN 25 oil for ECA districts. Managing these lubricants and keeping them matched with the proper fuel will be complex and challenging – and also an opportunity for the service-minded lube supplier.

For example, vessels will need to run on distillate fuels (MGO/MDO) when sailing in ECA, Huot explained to LubesnGreases. When switching to distillate fuels (MGO/MDO), OEMs recommend switching to low-BN cylinder oil, such as BN 25, at the same time fuel switching. No high-BN oil is recommended when the main engine is running on distillate fuels.

On the other hand, scrape-down oil analysis is recommended by OEMs to monitor the performance of cylinder oil as well as the condition of cylinder liners, especially for the most modern engines, like the Mark 8.1 onwards from Man Diesel & Turbo for example.

After 2020, when tougher fuel sulfur limits appear and more ECAs come into effect, cylinder oil selection could become yet more complex. But first, Huot reiterated, if a vessel intends to burn distillates in Europe from January onwards, she will need to lift SAE 50 BN 25 cylinder oil – specific lubricants to cope with burning distillates in a two-stroke, slow-speed marine engine – somewhere on the way before entering the regulated European area.