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April 25, 2018

Volume 3 Issue 4

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Canadian Lube Market Shrinking

Automotive lubricant demand in Canada is expected to fall roughly 5 percent from 390,000 metric tons in 2016 to 370,000 tons in 2021, thanks to lengthening drain intervals, the Freedonia Group predicted in a recent study. 

“Moderate growth in the country’s vehicle park will be offset by the technological improvements that will cause the Canadian automotive lubricants market to slightly contract,” Freedonia analyst Cory Bretz said in an interview.

Photo: dan_prat/iStock

Despite growth in the country's vehicle park, Canada isn't expected to enjoy any volumetric demand growth in Canada over the next five to ten years.

As the country’s vehicle fleet modernizes, engine oil drain intervals will increase, Bretz explained, stifling demand. Additionally, a greater share of new passenger cars require 5W and 0W oils, which are more likely to be made with synthetic base stocks and therefore to last longer.

Kline & Co. estimates that 0Ws and 5Ws accounted for 92 percent of Canada’s passenger car motor oil segment in 2017, said George Morvey, project manager at the Parsippany, New Jersey-based consultancy. That number is expected to grow to 98 percent of the market by 2026.

In the heavy-duty engine oil segment, SAE 15W-40 oils made up 60 percent of demand in 2017, but their portion is forecast to slip to 42 percent by 2026. “Full and semi-synthetic passenger car motor oil penetration reached 63 percent of [demand] in 2017, growing to 78 percent by 2026,” said Morvey.  

Light-duty vehicles consume the largest share of engine oils. Unlike other developed countries, however, off-highway equipment also encompasses a large share of demand. Leading suppliers include ExxonMobil, Shell and HollyFrontier, which owns the Petro-Canada lubricant business. Freedonia declined to provide specific estimates of market shares.

Canada’s automotive lubricant market generally mirrors trends in the U.S. market, noted Independent Lubricant Manufacturers Association’s CEO Holly Alfano. “ILMA members report an increase in demand for lubricants in Canadian construction, mining and agricultural sectors. For example, ILMA members say that off-highway demand is increasing and that synthetic formulations are in greater demand,” noted Alfano.

“I am a bit surprised that there hasn’t been a government push towards electric and hybrid vehicles,” Bretz admitted. “I didn’t expect them to have a gasoline and diesel moratorium date the way the French do, since electric engines struggle to hold their charge in cold weather and Canadians drive a lot of pickups and SUVs. However, for an otherwise environmentally-friendly government, I would have expected there to be more of an effort to at least push for hybrids, if not full electrics.”

Canada’s finished lubricant demand is 55 percent automotive and 45 percent industrial, added Kline and Co. in an interview.