Pemex, Mexicos national oil company, will improve its API Group I quality and promises to offer Group II base oils by 2017. In addition, it has opened the market to domestic and imported lubricants in almost 10,000 Mexican gas stations.
Jorge H. Loya Ramirez, CEO and president of Raloy Lubricantes, broke the news of Petroleos Mexicanos actions at the ICIS Pan-American Base Oils & Lubricants Conference in Jersey City, N.J. Pemex, he said, is committed to base oil production for the short, medium and long term. According to some recent information, the government-owned production is 4,000 barrels per day, and its growth plans consist of reaching a production of 5,200 barrels per day in 2013 – a 30 percent increase.
Pemex is working on the crude oil stream to improve the quality of Group I base oils and has already started the investment plan to offer Group II base oils to the Mexican market by 2017, Loya Ramirez announced on Nov. 30. While it has no plans to produce Group III, Pemex is determined to get its leading role back in Mexicos market, something it had a while ago.
In addition, he noted, earlier in November Mexico received the long-awaited news that Pemex Refinacion is opening the market for finished lubricants sold in nearly 10,000 gas stations across the country, as a result of decisions by Mexicos Federal Competition Commission. This ends a longstanding monopoly that had roped these service stations off from competitors.
Almost three million liters of [lubricant] sales is now open, said Loya Ramirez. This gives both domestic and foreign lubricant producers the opportunity to compete in this retail channel.
Mexicos economy is dynamic, and the future is promising for the domestic lubricant market, where Loya Ramirez projected annual growth of as much as 4 to 5 percent, thanks to the economic policies of new President Enrique Pea Nieto. Mexico today has a stable economy with controlled inflation.
The automotive industry is one of the countrys most dynamic, contributing 4 percent of national Gross Domestic Product, 20 percent of manufacturing GDP, 23 percent of exports and 600,000 direct jobs, Loya Ramirez said. Nineteen automakers have plants located in 15 of Mexicos states, he added, and this year will see four new ones open: Mazda in Salamanca, Volkswagen in Silao, Nissan in Aguascalientes, and Fiat/Chrysler in Saltillo. Hondas plant in Celaya (its second in Mexico) is due to begin production in 2014, and Audis will follow in 2016 in Puebla.
The auto industry can be said to be literally driving the economy; it produced a record 2.55 million light- and heavy-duty vehicles in 2011, and once this wave of factory construction is complete in 2016, the country should be able to crank out 3.5 million units.
Some of these may see service on Mexicos own roads, joining a fleet that now counts about 22 million passenger cars, 9 million cargo trucks and 332,000 buses. Motorcycles are also part of the transportation mix, with about 1.3 million units.
However, Loya Ramirez cautioned, Mexico relies on vehicle exports – it exported 2.14 million light vehicles in 2011 – so any drop in international markets affects its economy.
Looking at Lubes
Turning to Mexicos lubricant and base oil markets, Loya Ramirez said sales of finished lubes have been very stable in the last five years, with 2.5 percent annual growth. The market is currently estimated to be just under 900,000 metric tons, up from 814,000 tons in 2008.
Native national and local brands have 60 percent of the Mexican lubricant mar-ket, and global brands have 40 percent, he said. Top native players are Pemexs Mexicana (with 14 percent of the market), Roshfrans (10 percent), Raloy (6 percent), and Lubral (5 percent). Foreign majors with a sizable presence include ExxonMobil (16 percent), Shell (15 percent), Chevron (4 percent), BP Castrol (3 percent) and Total (2 percent). Smaller independents and imports account for the remaining quarter of the market.
By product (omitting process oils), he continued, the market is 37 percent passenger car motor oils, 26 percent heavy-duty engine oils, and 5 percent each transmission fluids and automotive gear oils. Antiwear hydraulic fluids account for another 12 percent of consumption, and 8 percent is miscellaneous industrial oils, leaving all other lubricant types to account for the remaining 7 percent of the volume.
A closer look at the automotive lubricants market shows API SL (non-ILSAC) is the most popular quality level of engine oil for passenger cars, at around 55 percent of the volume. And monogrades continue to be favored in this country, accounting for half of the passenger car engine oils and 70 percent of heavy-duty diesel oils. This is gradually changing, as OEMs begin to require multigrade oils and compliance with more stringent specifications, for both the vehicles to be exported and those for domestic use.
Mexicos lubes market today is served by a mix of about 70 percent domestically blended products and 30 percent imports, but the latter have made steady gains in recent years.
Imports rose from 164,000 tons of finished lubricants and greases in 2009 to 279,000 tons last year. One result of this shift is that Mexicos need for base oils has been sliding, Loya Ramirez continued. Some blend plants closed in Mexico, and more finished lubes are imported.
Thanks to these market forces, he projected Mexicos base oil consumption would finish up 2012 at 568,400 metric tons, down from around 589,000 tons in 2008. A key part of this story is the fading grip Pemex exerts on this critical lubricant component. Although Pemex owns the countrys sole base oil refinery (in Salamanca), and has nameplate capacity to make 6,000 barrels per day of Group I, the Mexican major has lost ground nearly every year since 2008, Loya Ramirez indicated. Its base oil output has fallen from 258,000 metric tons in 2008 to less than 178,000 metric tons in 2012, and in that same period its share of the countrys base oil market went from 42 percent to just 35 percent; imports now must satisfy 65 percent of the countrys blending needs.
By type, the imports are 81 percent paraffinic base oil and 13 percent naphthenics, the latter used mostly as transformer oils and in process oil applications such as rubber manufacturing. Synthetics and other nonconventional base oils make up the rest. Although Group I base stocks are the bulk of the paraffinic volumes, there is a downward trend now in Group I and imports are significantly up for Group II. Even Group IIIs are coming, in small volumes, he said.
The biggest source of base oil imports is the United States, with 92 percent of the volume. Most base oils, Loya Ramirez noted, arrive by truck, mainly from Houston and Brownsville, Texas. However, he projected, more and more base oils will reach Mexican blenders by railroad in coming years, as logistics improve.
Raloy Lubricantes produces and markets lubricants at its blending plant in Santiago Tianguistenco, about 32 miles southwest of Mexico City. Other companies launched by Loya Ramirez include plastic-bottle blowmolder Poliprocesos in Toluca, and chemical importer and marketer Diamond Internacional de Mexico, also in Tianguistenco.
From this vantage point, Loya Ramirez has watched as cargoes of base oil imports shifted from rail and vessels to mostly arrive today overland, by truck. Principal destinations for these volumes are terminals around Monterrey in the north, Mexico City and Salamanca in the countrys center, and Guadalajara in the west.
Rail, however, will prove an appealing alternative in the coming years. It already carries 11 percent of the base oil and lubricant imports, he noted, adding, It is my believe that considering the cost and environmental issues, this type of transportation will be used more for base oils as the years go by. Carriers such as Kansas City Southern Mexico, Ferromex and Union Pacific have added facilities around the country that can handle base oils, which will further boost volumes.
As for vessels, they mostly bring base oils to ports along Mexicos Gulf Coast such as Altamira, Veracruz and Coatzacoalcos. Ports along the Pacific Coast have no base oil storage and transfer facilities yet, but Mexicos excellent rail network puts them in easy reach, Loya Ramirez concluded.