The State of Base Oils at the End of 2020
Whilst it would be remiss to not mention the devastating effects of the ongoing COVID-19 pandemic on base oil markets, other landmark changes have continued through 2020 and altered the direction of the industry.
An interesting feature of today’s global base oil market, in addition to the changes themselves, is the rate at which markets have been adapting to new technological and production developments. These have come about for many reasons, but climate and environmental considerations have been the driving force behind many recent innovations in the lubricants industry. Perhaps this year has not been representative of the recent pace of change, since progress has slowed and activity muted due to the virus.
On a more positive note, for decades API Group I grades had been the workhorse base oils for most lubricant formulations, but in regions such as East Asia, the Middle East, North America and Europe, there has been a move to greater production of a new generation of base oils required to meet ever-tightening stringencies on emissions and performance of both automotive and industrial lubricants.
An interesting fact comes to light in the development of this new generation of base stocks. Certain Group I plants were able to adapt to produce Group III grades, which initially were deemed a solution to lift Group I formulations to the higher echelons required under new emission controls. Group III grades were used as a diluent with Group I, as Group III base oils alone could not be used in many formulations due to viscosity limits.
Enter the panacea of newer base oils.
Group II grades carry purity values similar to Group III with negligible quantities of sulfur and aromatics and have viscosity parameters that provide protection against engine wear.
Putting the various groups of base oils into context, global production of Groups II and III now exceeds Group I output by some 10 million metric tons. This differential is growing as new production in regions such as East Asia and the Middle East ramp up output of the new generation of base oils required in today’s—and tomorrow’s—market.
Within the passenger car motor oil markets, there has been a concerted move over the past five years to SAE 5W-XX and 0W-XX viscosities. These changes are aligned with a number of countries adopting lower carbon dioxide emissions limits in recent years. China, Japan and other East Asian countries have recognized that emissions play an important role in curbing pollution. With nations such as India now committed to joining that club, there may be a mass shift in engine oil viscosity recommendations from OEMs in those regions.
Europe has been at the forefront of emission controls with CO2 targets in place for next year at a maximum of 95 grams per kilometer for passenger cars.
In the heavy-duty camp, following the PCMO trend, three parameters continue to be important: a fine balance between engine protection, emissions control and fuel economy. In achieving new targets in these areas, there has been a move to lower-viscosity lubricants with lower volatility, which leads to increased use of Group II and Group III base stocks.
Industrial oils form an important part of the lubricants scene, ranging from turbine oils in power stations to white oils utilized as food-grade lubricants. These fluids tend to be comprised of around 90%–99% base oils, versus around 75%–85% base oil content for the automotive sector.
Traditionally, industrial lubricants relied on Group I base stocks, but it has been found that Group II and Group III oils can improve performance in the finished product. With most industrial lubes being manufactured with viscosities between ISO 22 and ISO 100, Group II grades can cover this range without being blended with another type of base oil. This simplifies purchasing, handling, storing and blending of finished products.
Additionally, Group III base stocks can meet viscosity requirements up to ISO 46. With these discoveries, the use of Groups II and III base oils is expanding quickly throughout global markets, whilst there is further decline in demand for Group I grades.
The shipping industry has traditionally leaned heavily on Group I base stocks to make lubricants that it uses, such as cylinder oils. Group I base oils were traditionally less expensive, but Group II prices have fallen as availability has increased, and these oils provide improved control of oxidation and volatility as well as better volatility. Further, Group II oils are being used in low-base number lubricants that are compatible with the low-sulfur fuels required by the IMO marine fuel sulphur cap that came into effect the first of the year. With lower additive treat rates, the solvency provided by Group I oils is less needed and the reliance on Group I base oils has declined.
Another set of base oils, including Group III produced from gas-to-liquid sources, Group III+ grades and polyalphaolefins are also on the rise. These base stocks are primarily used to blend finished lubricants for extreme operating conditions where either very high or very low temperatures are encountered, or where extended lubricant life is a necessity.
With the coronavirus pandemic still wreaking havoc throughout global economies and populations, this year has perhaps not been one during which innovation and new opportunities have abounded.
Looking back, this year became a time in which survival was the main focus for many companies, including those involved in the base oil industry. Hopefully we can look forward to the prospect of a better time for all in 2021.
Ray Masson is director of Pumacrown Ltd., a trader and broker of petroleum products in London, U.K. Send him comments or topic suggestions at pumacrown@email.com.