With that kind of impact, the move toward more sustainable products has borne fruit for the rerefining industry. Customers—both new and longstanding—are more interested in rerefined base oils than before, multiple representatives of rerefiners told Lubes’n’Greases. Companies have already sold products to, if not had conversations with, new customers, while current clients are asking for more stock.

Ellie Bruce, vice president of business management and marketing at Heritage-Crystal Clean, based in Elgin, Illinois, said its customers, including oil majors, are already looking for additional product. New majors are also reaching out, inquiring about rerefined base oils.

Craig Linington, executive vice president of Safety-Kleen, has also observed increased interest in his products from clients new and old. “I think in numerous segments of the value chain there’s increased interest,” he told Lubes’n’Greases. “Large customers, whether they’re publicly or privately held, may be under some sort of pressure from investors to demonstrate progress around sustainability. As you move up the value chain, I think those that are in the blending space are either trying to respond to their customer needs or have their own needs as it relates to making progress with sustainability.” The company is also working to update its life cycle assessment, he noted.

“I think companies want to build their own narratives toward their customers,” said Juan Fritschy, CEO of Avista Oil USA. “They want to say, ‘We are buying these base oils that have an advantage from an environmental point of view.’ They may have customers that are more sensitive to those topics.”

The rerefining industry was not spared from the effects of the pandemic. Amy Claxton, CEO of My Energy Consulting, told Lubes’n’Greases in May that U.S.-based rerefiners suffered because they “produce base oils suitable for automotive uses, which are highly exposed to consumer behavior and demand for passenger car engine oils.”

Other factors contributed to a tough year, some even exacerbated by the pandemic, Linington said. Even before COVID, crude oil prices dropped significantly, he said, while the ensuing pandemic also influenced pricing for oil products. A drop in demand for lubricants as the United States shut down then went hand in hand with less oil available for rerefiners to collect. 

Indeed, revenues and profits fell for major rerefiners in 2020. Heritage-Crystal Clean reported a 19% drop in revenue. Safety-Kleen, based in Richardson, Texas, shuttered about half of its rerefining capacity last year to protect its profitability, Linington said, adding that he believes it was the right decision. Avista Oil experienced a decline in demand but applied for a PPP loan and was able to keep all of its employees, Fritschy said. 

Collection during COVID was also an issue. Collection volumes dropped by at least 35%-40% at the height of the pandemic, depending on the location of the company regionally, Bruce estimated. Fritschy said collection for Avista dropped as low as 50% during the second quarter of 2020. And rerefiners don’t have spare feedstock laying around.

The industry recovered quickly, and as the increase in interest might suggest, rerefiners are already in a strong position even as the pandemic continues. 

“Used oil collection came back fast, much faster than some of our other services,” Bruce said. “Things have improved really since quarter three of [2020]. It was slow improvement, not like there was a switch, but then quarter four was better than quarter three and then quarter one of [2021] was better than that. It came back relatively quickly considering we’re almost two years into the pandemic now.”

Linington has seen similar strength. “I think we’re much stronger in our used motor oil collection business,” he said. “We’ve taken the opportunity the last two years to make investments in our rerefineries, to increase capacity and improve uptime. We’re in a stronger position market-wise due to the adaptations of our company.”

Linington also pointed to an almost forgotten development: IMO 2020—which limited the sulfur content in the fuel used on ships—went into effect just before the pandemic. “The impacts of IMO 2020 were blurred by the pandemic, but that’s created some more used motor oil as well and improved effectiveness of collections,” he said.

Rerefining operations across the pond are also finding success. One obvious factor is the European Green Deal, which has pushed European original equipment manufacturers and oil majors to find environmentally friendly ingredients for their products. 

A supply chokepoint of base oils derived from crude also benefited rerefiners. While crude oil supply waned, rerefined base oil remained a reliable source for lubricant producers. “What can be the worst for a producer of lubricants is that they have commitments to sell to their clients, that they have demand for their products, but they cannot buy the products they use for making their blends,” said Marc Verfürth, CEO of Avista Oil AG, based in Uetze, Germany. “That has happened in 2021. The only industry which was able to deliver these base oils was the rerefiners.”

Avista’s European operations experienced only a few months of heavy disruptions to its business during the pandemic in 2020 due to lockdowns. The rerefining industry on the continent has recovered since then and is on its way to a better situation than pre-pandemic. 

Growth is capped, however, due to sourcing issues. E-mobility means less waste oil, especially in mainland Europe where electric vehicle sales are growing in France, Germany and the United Kingdom. Securing adequate supply will become more competitive, meaning companies will carefully consider what investments to make. 

“I’d say right now we are in a very regular environment that is not impacted anyhow by recent COVID developments,” Verfürth said. “From an Avista European perspective, we look very hopeful into next year.”

Verfürth would like to see lubricants made from higher quality base oils used in Europe. “The U.S. rerefined base oil is comparably better because of the good input quality of the waste oil,” he said. “In the U.S. you have very solid Group II and Group III used lubricant oil bases while in Europe it’s high Group I content. The U.S. can produce, with equal technology, better base oil products. We predict that used oil quality is going to increase over the next three or four years to support the quality of the rerefinery from the base oil perspective.”

Future growth for the rerefining industry on both continents will be modest. In the U.S., there are a couple of expansion projects in the pipeline, but most companies seem to be standing pat. According to Lubes’n’Greases 2021 Global Base Stock Plant Guide, U.S. rerefined base oil capacity sits at 875,000 metric tons per year, the majority of which is Group II.

In Europe, capacity totals 877,000 t/y for rerefined base oils, and is mostly Group I. That capacity is likely to increase in Europe after 2025, according to Verfürth. Avista’s own European facilities in Germany and Denmark have capacity for 140,000 tons and 100,000 tons of waste oil input, respectively, and the company is upgrading capacity by 30,000 metric tons at each site.

“I really think the respect for the rerefined product has grown. Most majors are going to tell you the rerefined product is as good or even better quality” than crude-based products, Bruce said. 

“I do feel that the time for rerefining is really coming,” she said. “I’m glad that people are taking a look at it under a different lens.”

Read more from our Special Report: Base Oils Emerge from Pandemic:

• As the Pendulum Swings – The COVID-19 pandemic led to sharp changes in base oil pricing and margins. Will the market settle into a new post-pandemic norm, and what might that look like?

• Base Oil Rerefiners Rebounding from Pandemic – The pandemic wreaked havoc on the base oil market, but rerefiners may have emerged stronger than ever.

• China Moves to the Top of the Heap – China overtook the United States in 2021 as the country with the most base oil refining capacity. What contributed to its rise?

Will Beverina is assistant editor for Lubes’n’Greases. Contact him at Will@LubesnGreases.com