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June 27, 2018

Volume 3 Issue 4

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Brazilian Market Bouncing Back

RIO DE JANEIRO – After several years of decline, Brazil's lubricant industry is showing signs of reviving, according to speakers at an industry conference here last week. Sales from January through April increased 5.9 percent year over year, and demand is forecast to rise an average of 2 percent annually for the next four years. 

That’s big news because Brazil is by far the largest lubricant market in South America, thanks to the size of its automobile fleet and its industrial base. But one speaker at the Meet the Market South America conference added a dose of caution to that outlook, noting that the rise of electric vehicles will restrain Brazil’s lube demand in the long term.

The Brazilian market was hammered the past four years as the country struggled with political and economic crises. Lube production dropped 16 percent between 2013 and 2016 and then fell another 0.2 percent in 2017, according to Pedro Nelson Belmiro, director of Onze, the local publishing company that organized the event.

He added, though, that the market appears to have rebounded this year. Based on data reported by the National Agency of Petroleum, Natural Gas and Biofuels, lube sales in each of the first four months exceeded levels for the corresponding months of both 2017 and 2016, and sales for all four of those months totaled 370,298 metric tons, 5.9 percent more than the same period for last year.

One of the main factors, Belmiro said, was that vehicle sales increased 21.3 percent during the period to 762,800 units. Auto parts sales rose by 26.2 percent.

For the next four years, he said, lubricant demand should continue to rebound, though at a slower rate than the start of 2018. Onze, the publisher of Lubes em Foco magazine, forecasts demand of 1.03 million tons this year. It also predicted the market will increase at an average annual rate of 2 percent to 1.19 million tons in 2022.

Petrobras Distribuidora Marketing Manager Kleber Café Lins estimated the market to be larger, with supply of 1.18 million tons already. He pegged the value of that volume at 8.5 billion reais (U.S. $2.3 billion).

Petrobras remains the leading supplier with a 23 percent share of the market, Belmiro said. Ipiranga is second largest with a 15 percent share followed by Cosan subsidiary Moove (14 percent), Chevron and Petronas (9 percent each) Shell (8 percent) and Total, Castrol and YPF (2 percent each).

According to Lins, automotive lubes account for 68 percent of the total volume and industrial lubes the remaining 32 percent. Within the automotive segment, 55 percent is used in light-duty vehicles and 45 percent in commercial vehicles. He added that heavy engine oils are still popular in Brazil.

“The main automotive oil used is 15W-xx, followed by 20W-xx, 5W-30, 10W-xx, 5W-40/50, and others,” Lins said.

While the outlook for Brazil’s market is improving, Lins emphasized that it will face challenges in coming years. Like much of the rest of the world, the country’s vehicle population will shift toward electric and hybrid models, which use less lubricants. Since the industry is still evolving, performance demands for automotive lubricants will as well, he said.

Meanwhile, Brazil’s market is also challenged by demands for engine oils to provide improved compatibility with biofuels. Brazil uses high levels of biofuels, which tend to migrate to engine oil sumps where they collect and dilute the oil.