Market Sectors

Additives Growth Throttles Back

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Worldwide additive consumption will grow at an average annual rate of 0.7 percent – almost twice the growth rate of finished lubricants – from 2008 to 2013, Kline & Co. predicts. Dispersants, viscosity index improvers, antioxidants and friction modifiers in engine oils will account for most of the new volume.

In a March 26 webinar on the global additive market, Klines Energy Industry Manager Milind Phadke said the consultancy pegs global lubricant consumption in 2008 at 40 million to 40.5 million tons. Asia Pacific is now the largest lubricant consuming region, Phadke said, accounting for 34 percent of total demand, followed by North America (26 percent), Eastern Europe (15 percent), Western Europe (12 percent), South America (8 percent), and Africa and the Middle East (6 percent). Global additive consumption in 2008 totaled 4 million to 4.5 million tons, roughly a tenth of overall lubricants volume. On a global basis, the biggest uses are heavy-duty motor oils, which account for one-third of the world total additives demand. Other significant products include passenger car motor oils (26 percent) and other automotive lubes (7 percent). On the non-automotive side, metalworking fluids account for the largest amount of additive demand (17 percent), followed by industrial engine oils, hydraulic fluids, grease and and general industrial oils.

By volume, dispersants, viscosity index improvers and detergents, at 23 percent, 22 percent and 21 percent of total volume, respectively, are the biggest additive sellers, said Phadke, whose office is in Pune, India.

Before the onset of the recession, he said, Kline had predicted long-term lubricant growth of 2 percent per year. There is still a lot of uncertainty because of the recession, Phadke said, and Kline has lowered its growth projections for both finished lubricants and additives – but the Little Falls, N.J.-based company still projects overall growth from 2008 to 2013.

Kline now sees global lubricant consumption growth averaging 0.4 percent per year through 2013. This masks the fact that during 2009 and 2010 all lubricant markets will either decline significantly or show a significant reduction in growth rates. Beyond 2010, Kline projects a recovery which would bring consumption levels in 2013 to just above the consumption in 2008.

Asias Pace Slows

Under Klines post-recession projections, North American finished lube demand is now projected to decline at 2 percent rather than be flat, and Asian demand is expected to grow at just under 2 percent rather than the 5 percent annual growth previously predicted. Western Europe will decline at 2 percent rather than 1.5 percent per year. South American growth is reduced from about 3 percent to just 1 percent. And growth in the rest of the world is also reduced from about 3 percent to 1 percent.

Most finished lube products will show growth, reiterated Phadke, although factory fill will be drastically reduced due to the drop in automotive production, and industrial engine oils will be dragged down by marine oils, which are adversely affected by the slowdown of global trade. Industrial production has dropped significantly worldwide. This will adversely affect the consumption of metalworking fluids and general industrial oils.

Outpacing finished lubricants, additive consumption will grow 0.7 percent per year for the next five years, said Phadke. Passenger car motor oils, heavy-duty motor oils and metalworking fluids will account for most of the incremental volume in that time.

There are essentially three types of passenger car motor oil market, Phadke continued. First is the United States, Canada and OECD Asia. In this market, fleet-wide specifications are developed by the ILSAC/Oil Committee, and all oils are expected to have backward compatibility. Other characteristics include rapid penetration of new-quality oils in the marketplace; multigrades blended using API Group II and III base oils; low oil change intervals; and low penetration of synthetics.

The second market type is Western Europe, where new specifications are developed by ACEA/ATIEL/ATC. Here, each spec generally has three oil categories for different vehicle types. Characteristics of the market include persistence of older quality levels in the marketplace; a high share of diesel-powered vehicles; use of Group I, III and PAO base stocks; long drain intervals; and high penetration of synthetics.

The rest of the world uses either the U.S. or EU specs with some time lag, Phadke said, and is extremely fragmented in terms of quality levels in the marketplace. Formulators often under-treat with additive packages and up-treat with antioxidants to extend oil life. Characteristics of the market include very old passenger fleets; a mix of both gasoline and diesel vehicles; use of Groups I, II and III; and very low penetration of synthetics.

Propelling Forces

Despite the marked differences among regions, the forces impacting engine oil formulation are the same in all regions. These include a focus on improving fuel economy, which is driving increased consumption of friction modifiers.

Formulators also increasingly must ensure that automotive engine oils are compatible with emission control devices, Phadke said. This has required reducing phosphorus levels (originating from the ZDDP family of antiwear additives) and, expected with the upcoming ILSAC GF-5 quality specification, reduction of volatile-component phosphorus content.

Generally, increased oil durability and extended drain intervals are compelling the increased use of dispersants, antioxidants and higher-performing base oils. And there is rising use of flexible-fuel vehicles, which operate on ethanol and/or gasoline but need special corrosion protection.

Overall, demand for additives for passenger car motor oils is growing faster than demand for the oils themselves, said Phadke, because of increased treat rates and more sophisticated, robust oils. By contrast, demand for detergents and antiwear agents is not growing on the passenger car oil side.

The same three market types exist for heavy-duty oils – North American, European, and the rest of the world, said Phadke, but with the difference that there is currently lots of talk about unifying heavy-duty specs globally.

Emissions Mission

The overriding driver for heavy-duty formulation change is regulation to reduce tailpipe emissions and lower sulfur in diesel fuel. This leads to four specific factors:

Use of exhaust gas recirculation (EGR) to reduce nitrous oxide emissions. This emissions technology produces soot and nitrous acids, calling for more dispersants and a higher base reserve (TBN) in the oil to neutralize the acids.

Use of diesel particulate filters (DPF) to reduce emissions of particulate matter. However, ash plugs the filters, so lower-ash oils are needed, limiting the amount of detergent that can be used.

Use of biodiesel – very important in Europe – which accumulates in the oil sump and oxidizes, creating sludge and varnish. This means the heavy-duty motor oil needs more dispersants and antioxidants.

Use of ultra-low-sulfur diesel, which leads to lower levels of sulfurous acids in the engine crankcase and hence reduces the need for TBN reserve.

Additive demand for heavy-duty oils will grow by 1.2 percent a year through 2013, said Phadke, because treat rates will increase. Dispersant and antioxidant demand will grow, while detergent demand will be flat because of the trend towards low-SAPS oils.

Dispersants, viscosity index improvers, antioxidants and friction modifiers are the four main growth areas for additives globally, Phadke concluded. Viscosity index improvers are need as developing areas shift from mono-grade to multigrade oils, while friction-modifier growth will occur primarily on the passenger car side, not the heavy-duty side.

Overall demand will decline for detergents (although biodiesel and EGR call for more detergents, complicating the picture), and for antiwear/extreme pressure additives.

Klines complete study, Global Lubricant Additives 2008-2013: Market Analysis and Opportunities, is available for $50,000; section pricing is also available.

Information on this and other Kline lubricants industry studies can be found at www.klinegroup.com.