Marine lubricants is a global trade, accounting for about 2.1 million metric tons of cylinder oils, trunk piston engine oils, system oils and other seaworthy products each year. Conducted largely below the radar of landlubbing rivals, its a demanding enterprise that represents 5 percent of all lubricants consumed worldwide, according to Total Lubmarine.
The scale of the marine industry is certainly impressive, as 10 billion tons of cargo criss-cross the oceans each year, the companys Marie Braouezec told a recent industry conference. According to the U.N. International Maritime Organization, she added, more than 100,000 registered vessels ply the globes waters, including 60,000 deep-sea vessels.
Each small container ship typically consumes 50 tons a year of cylinder lubricant, and a large ship powered by two-stroke engines may require 200 tons a year, said Braouezec, who is Total Lubmarines general manager, Americas. A lot depends on the speed of the vessel, and the big goal for ship owners is to find the right balance between the size of the vessel and the optimum speed.
One way to view this market is by vessel type. Total Lubmarine estimates that bulk freighters consume 23 percent of all marine lubricants, tanker and container ships account for 22 percent each, and the remaining 33 percent goes into all other types.
The biggest customers expect their lube suppliers to maintain inventories at up to 1,000 ports worldwide, available for delivery at short notice. They demand training for their staff, oil analysis services, and digital tools to track product availability if they should need to change route and quickly restock.
Over the past 10 years, the volume trend throughout this segment was pretty nice – really not bad, Braouezec said in her Dec. 4 presentation to the ICIS Pan American Base Oils & Lubricants Conference in New Jersey. Now, however, the marine lubricants market outlook is flat and may see little growth for at least five years, she emphasized. It will only reach 2.2 million metric tons in 2023.
What triggered these doldrums was frenzied overbuilding of new vessels, many of which launched just as global trading activity began to slump, leaving ship operators with huge capacity overhangs and depressed utilization rates. More ships are on order, so that overhang will take time to absorb, but meanwhile the market will be anything but placid, Braouezec said.
She went on to outline a number of turbulent trends on the horizon: Lubricants will have to satisfy both global and local pollution control mandates, ship owners are demanding greater inventory efficiencies, and formulators must cope with waning supplies of the heavy base oil grades that marine engines have traditionally favored.
One of the biggest changes this market has seen is the shift in trade from West to East, she continued. Many carriers used to register their vessels under the flags of maritime havens like Panama, Liberia and Greece. But they increasingly fly Asian flags now: Marshall Islands, Hong Kong, Singapore and China all have berths in the list of top 10 flags. However, the real key to sea power is who owns these ships because, as Braouezec reminded, Ship-owning countries have nothing to do with flags. She quickly limned the current scene:
Fully half of the top 10 ship-owning countries are Asian: Japan, China, South Korea, Singapore and Taiwan. Greece ranks first, and the United States eighth.
Five of the top 10 shipping companies are Asian, too. They include NYK Line, Mitsui OSK, Cosco, Kawasaki Kisen and China Shipping.
Nine of the worlds top 10 container ports are in Asia; the other is in the Middle East. Europe and the Americas have been pushed from the list, Braouezec noted: The first European port on the list is Rotterdam, now at number 11, and the first U.S. port is Los Angeles, which has dropped to number 19 on the list.
A regional breakdown of the market echoes the geographic shift: Only 15 percent of marine lubes demand comes now from North America, and 22 percent from Europe. Asia, with 53 percent, consumes more than those two continents combined.
Rather than be left behind, Total Lubmarine has joined the migration. On Dec. 17, its first batch of marine lubricants was manufactured at Totals new blending plant in Tuas, Singapore. Singapore ranks second on the list of busiest sea ports, and the plant, which opened in July, is the companys largest worldwide. It has a jetty directly on the sea which can load the products on delivery and supply vessels. Three double-hulled barges, operated by logistics partner Ocean Tankers, can take marine lubricants directly from the Tuas jetty to waiting ships.
In her presentation, Braouezec noted that ship owners are taking steps to save money at sea. Theyre downsizing engines, using longer strokes, steaming more slowly and often burning dual fuels. All this puts stress on the lubricants.
Another complication is the U.S. Environmental Protection Agencys Vessel General Permit program, implemented at the end of 2014. It requires ships to use environmentally acceptable lubricants wherever theres an oil-to-water interface, when operating in U.S. waters. So when the U.S. Coast Guard boards a ship in port, among other things its inspectors are seeking is assurance that rapidly biodegradable lubricants are being used. Switching to a biodegradable product can be time-consuming, but failure to do so will cost the operator in fines and port delays.
Ships also must satisfy pollution control measures such as the Emissions Control Areas ordered by the International Maritime Organization. When operating within ECA regions, ships may only burn fuel with less than 0.1 percent sulfur, and they also face strict restrictions on emissions of NOx and CO2. Operators must adopt lubricants with a much lower base number (BN) in these regions as well, to further limit their emissions.
One effect of all these changes has been a new phenomenon called cold corrosion. To combat this damage, ships need a very high BN cylinder oil, of around 100, versus the BN 70 that was more common before.
Unfortunately, very high BN runs afoul of the ECA restrictions, meaning that ships often must carry two, three or possibly five lubricants (including biodegradable ones) to comply with all the operating conditions they face, at sea and in ports.
Braouezec believes BN levels for cylinder oils may start to edge down as fuel sulfur levels everywhere continue to be trimmed, but these oils are still going to need good solvency and detergency. The main market will still be for very high BN oils, she asserted.
Blending marine lubricants is growing in difficulty as heavy grades of API Group I base oils are in tight supply. Asked if Group I base oils will continue to be the primary choice for making marine lubricants, Braouezec replied, No, because we have no choice. Marine lubricants are small, and we cannot dictate what refiners make. But we at least need to have heavy grades.
Also extremely short is bright stock for making SAE 50 grade oil, which big engine OEMs like Wartsila wont move off from, she said. Were still trying to convince them that using SAE 40 might be viable, because at least that viscosity grade can be produced without the use of bright stock.
The biggest issue right now is idling vessels, Braouezec said. Overbuilding has collided with slowing economic growth, and too many vessels today are chasing too few cargoes. Some operators are sailing closer to the wind, taking smaller deliveries of lubricants to get to the next port. This causes port congestion and higher costs for the lube supplier, who has to maintain the same infrastructure as for larger volumes, she pointed out.
Other ship owners are taking a cutthroat approach, and going aggressively after market share. Theyre increasing vessel size in order to capture economies of scale by moving more cargo with less fuel. One example is the CMA CGM Benjamin Franklin, a French mega-class container ship thats longer than the Empire State Building is tall. Able to haul 18,000 twenty-foot-equivalent containers, it docked at the ports of Los Angeles and Oakland, Calif., in late December, the first time such a massive ship has reached the U.S.
The upshot of building on such a scale is that utilization is falling, including for the worlds biggest container ships, and so are shipping rates. The impact, Braouezec concluded ruefully, is that less-competitive ships will be idled in the coming year – and wont be buying lubricants at all.