In 2007, the global lubricants market was a frothy 36 million metric tons, according to German lubricants company Fuchs Petrolub. While demand crumpled to just 32 million tons in 2009 due to the worldwide financial crisis, the market seemed headed for a quick recovery in the following years.

What actually happened was disappointing. After an initial flash of speed, global lubricants demand growth has stalled, plodding from 35.2 million tons in 2011 to 35.4 million tons in 2013, then to 35.6 million in 2014. It was 35.6 million again in 2015.

Forward momentum indeed has slowed to a crawl, Apu Gosalia, the Mannheim-based companys vice president of sustainability and global competitive intelligence, confirmed to LubesnGreases recently. He pegged actual market growth in 2015 at a negligible 0.1 percent. Fuchs data do not include marine lubricants; other experts say this segment is flat too, and would add around 2.2 million tons a year to the total.

Given this picture of static consumption, when comparing 2007 to 2015 one could think that not much happened over the past seven years, said Gosalia. But in fact a lot did, when we look at the underlying regional lube market dynamics in terms of quantity and quality, executive board member and Chief Technology Officer Lutz Lindemann, Ph.D., remarked earlier this year. To start, there have been dynamic marketplace shifts, between geographic regions and within the ranks of competitors.

Speaking in January to the 20th International Colloquium Tribology, organized by Germanys Technische Akademie Esslingen, Lindemann gave a rapid rundown of todays environment for lubricants worldwide, and went on to advise that sustainability – economic, environmental and social – will be a critical issue for the companies that survive in the long term.

Back in 2007, he pointed out, Asia-Pacific, the Middle East and Africa together represented only 46 percent of global lubricants demand. By contrast, they collectively account for more than half now: Asia-Pacific consumes 42 percent, Africa 6 percent, the Middle East 5 percent. Over the same period of time, North America and Western Europe lost ground in volume terms because these mature markets have been moving to higher-quality products, which allow longer drain intervals (and also tend to carry a higher value).

One startling result of the geographic shift is that Asia-Pacific today consumes more than twice the lubes per annum than all of North America, with its 19 percent market share.

Tunneling in to look at the top 20 individual countries, Lindemann underscored how agitated the rankings have been just since 2013. Japan and Russia switched places for rank 4 and 5, as did Iran and Mexico for 9 and 10. Italy dropped out of the top 20 entirely, while Saudi Arabia made the list for the first time in 2014. Only two European countries even make the top 10 list anymore: Russia (fifth) and Germany (seventh).

Not unexpectedly, Fuchs finds that China continues to lead the world in volumes of lubes consumed, followed by the U.S. Together these two accounted for one-third of global demand last year, yet their markets are poles apart. In per-capita terms, the U.S. is far ahead, with a yearly average close to 19 kilograms. But China, the largest lubes market of all, consumes a scant 5 kg of lubes per year per person.

Unfortunately for growth addicts, China is unlikely to reach U.S. levels of per capita consumption. Instead, as Lindemann told the Colloquium, and Gosalia later reiterated to LubesnGreases, China is already starting to transition to a mature market. Fuchs believes a more probable model for Chinas lubes trajectory is Europe, where the appetite has settled around 8 kg/person/year. The company expects Chinas total market will progress at a slower rate going forward, rising from roughly 7 million metric tons now to 12 million tons someday.

Turning to the changing competitive scene, Lindemann noted that the top 20 companies (in volume terms) now make up two-thirds of global lubricants volume. According to Fuchss data, the top five manufacturers are Shell, ExxonMobil, BP, Total and Chevron, in that order. Filling out the top 10 are PetroChina, Sinopec, Idemitsu, Fuchs and Petronas.

One of the strongest drivers in these rankings has been a wave of mergers and acquisitions, such as Petronass purchase of FL Selenia, and the merger of Japan Energy and Nippon Oil into JX Nippon. Not to be left behind, Fuchs leaped ahead three spots in the rankings, also thanks to a buying spree. It bought Deutsche Pentosin-Werke last May and then Swedens Statoil Fuel & Retail Lubricants in August, for a combined investment of 220 million euro, the company told analysts recently. The acquisitions are a big reason its annual revenue in 2015 surpassed the 2 billion euro mark for the first time in its history. Other notable Fuchs acquisitions have included Lubritene and Batoyle in 2014, and Shells Cassida food-processing lubricants in 2010.

The Cassida example illustrates another point that Lindemann made to the Colloquium: As the vertically integrated majors (like Shell) concentrate on high-volume product lines, they have retreated from lube niches, leaving the field to new and/or more nimble players. Besides Fuchs buying Cassida, another example he cited was the sale of ExxonMobils lube business in Brazil to the sugar and ethanol producer Cosan, a newcomer to lubes.

There has also been a wave of restructuring by major oil companies, some of which separated their lube assets into stand-alone entities. (Examples: Ashland is preparing to spin off Valvoline to shareholders; and Phillips 66 took all downstream assets of ConocoPhillips, including lubricants, while Conoco kept the upstream businesses.) Meanwhile, government-controlled national oil companies like Chinas Sinopec and Russias Lukoil have become more glocal in their aspirations, Lindemann said, becoming more active in global lube markets while maintaining commanding leads at home.

Another wave of upheaval, he noted, came when some raw-material suppliers moved vertically into the lube manufacturing space. Additive maker Lubrizol several years ago bought Chemtool, one of the worlds largest private-label grease manufacturers; and base oil refiner Calumet Specialty Product Partners has spent heavily to acquire a family of specialty lube companies, including Royal Purple and Bel-Ray. Fuchs is finding that competition is also becoming more intense from an influx of private equity capital flooding into the lubricants arena.

All of these trends are making competition fiercer and life no easier for independent blenders. Lindemann suggested that one strategy for managing all these trends is to concentrate on niches that the majors no longer want to fill, and to align more closely with customers.

More urgently, he advocated that lube companies be less reactive to short-term pressures, such as quarterly profits, and begin to put long-term sustainability at the core of their decision making processes. The environmental argument is certainly compelling, as business now consumes about 50 percent more than the planet can sustain, Lindemann said. In other words, globally we would need 1.5 planets to meet our present demands, so we are clearly living beyond our means. Its like eating into the capital in a bank account instead of living off the interest.

Lindemann also took note of new technologies that are changing how lubricants are used, and how much. Oil-free systems are becoming more common, while new materials and so-called additive manufacturing processes (3-D printing) dont need standard industrial oils. He advised that lube suppliers will need to add more basic research to get a grasp of these materials and processes.

He pointed to other applications where demand is shrinking. Europes need for engine oils has fallen 20 percent over the past 15 years, he said, while coal mining is a dying business. Wind energy is moving to the use of direct drives which dont require gear oils; electro-hydraulics are replacing traditional fluid-dependent hydraulics; and dry machining is cutting into metalworking fluid demand.

Nevertheless, customers and investors alike are demanding that lube companies be actively working towards sustainability. For its part, Fuchs in 2010 joined 20 other companies in Germany as a signatory to the Code of Responsible Conduct for Business, a resolution emphasizing fair competition, social partnership, performance and sustainability as core business principles.

The question is how to live up to this commitment. Fuchs rejected mere greenwashing to enhance its public image, but also recognized the conflict between long-term sustainability targets and short-term profitability targets. There is a sore lack of industry standards defining what sustainability means, Lindemann said, which makes improvement that much more difficult to calculate.

Taking up the theme, Fuchs Vice President Apu Gosalia said profits remain a core tenet for sustainability – but they can no longer be the only one. The three Ps of business used to be profits, profits and profits, but now they need to be profits, planet and people, he told last months meeting of the European Lubricating Grease Institute in Venice, Italy. Sound business decisions can only be made in recognition of the economic, ecological and social impacts that may result, he declared.

The DNA of most people in this room is already favorable towards sustainability, Gosalia added positively. The lubricants industry has much to offer society, such as energy savings, reductions in greenhouse gas emissions, and prevention of friction, corrosion and waste. However, the industry lacks benchmarks and reference points to measure its impact on raw materials, processes or customers.

What you cannot measure, you cannot manage, and what you cannot manage you cannot modify, Gosalia said. As an example, he pointed to the energy consumption per pound of grease a manufacturer produces. A single company might be able to reduce its total or relative energy consumption, but if you dont know the benchmark – what the industry as a whole is doing – you wont have a reference point to measure against.

Gosalia gave several examples of how internal improvements at Fuchs are having a measureable impact on sustainability:

In the United States, the company hired engineers to look at wherever insulation would provide the biggest energy savings on its process units. With that knowledge, the investments were made and the project paid for itself in just 15 months.

When adding new tanks in Germany, it decided to specify sloped, conical bottoms. These tanks can be cleaned with air pressure, instead of waste-generating flush oil.

Carbon dioxide limits have been imposed on all cars in the Fuchs company fleets, so that each year the replacement vehicles have to meet stricter standards. (Gosalia quipped that this unpopular decision is the most secure way to lose your last friends in the company if you made any before.)

We believe the topic of sustainability is not going away, he continued. The pressure from customers is increasing. Lubrication is about fighting friction and saving energy, but its time to stop looking at the chemical and energy industries for benchmarks. We are our own industry. Theres a war going on in business for the best talent and people, and we need to tell our story, let people know our industry is important for society. We are not fully exploiting the benefits of this industry we have here.

To get started, Gosalia concluded, the lubricants industry needs a coalition of the willing, who will work together to set appropriate standards and measurement tools for sustainability. The alternative is that some group or government will do this. Lubricant industries and associations should agree on these standards and measurements before others impose it from the outside. z