Latin, South America Transition to Better Lubes

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Latin, South America Transition to Better Lubes

The Latin and South American regions are expected to experience slow, gradual growth in demand for multigrade and lighter engine oils in the coming years, stimulating imports of API Group II and III base oils, an industry analyst told a conference last week.

Lubricant demand for Latin and South America was estimated at 2.9 million metric tons in 2017, H. Ernest Henderson, president of K&E Petroleum Consulting, said at ACIs U.S. Base Oils and Lubricants Summit in Des Moines, Iowa on Aug 22. This estimate is based on data collected by both his Oklahoma City, Oklahoma-based consultancy and Kline & Co.

Photo: Alf Ribeiro/Shutterstock

A downtown Sao Paulo, Brazil traffic jam. Automotive engine oils account for almost half of lubricant demand volume in Latin and South America.

Automotive engine oils accounted for almost half of that volume, with heavy-duty engine oils having the largest share among all types of lubricant demand. Industrial oils are also in high demand in the region, supported by mining and manufacturing. It is a fairly nice balance between the automotive and the industrial side of things, he said.

Brazil represents the largest lubricant market in Latin and South America, with an estimated 47 percent share of demand in 2017, Henderson said, citing data from Fuchs, IHS and Kline. Central America and the Caribbean accounted for 12 percent of demand, Argentina for 10 percent, Venezuela for 6 percent and Peru, Columbia and Chile for 5 percent each. Ecuador had a 3 percent share, and all others accounted for the remaining 7 percent.

As you get into the regional impacts for that region, whatever Brazil does will be a reflection of what the region will do, Henderson said. Brazil has a lot of automotive products and a lot of car manufacturing – obviously they are a big driver as far as utilization of finished lubricants are concerned and base stocks that go into that.

In Latin and South America, lubricants demand is driven more by trucks than by passenger cars, Henderson stated. If youre looking at utilization of base oils, Group II would be a very good demand segment for them, he explained.

API SN Plus, SN and SM and ILSAC GF-5 are gaining increasing shares in the regions passenger car motor oil segment. A quality upgrade is occurring in Brazil, Mexico and Chile, Henderson claimed, stating that demand is growing for Oils meeting General Motors Dexos1 specification. Overall the passenger car motor oil viscosity in Latin and South America is shifting towards SAE xW-20 and xW-30, he said.

On the heavy-duty engine oil side, the market is primarily supplied with API CI-4 and ACEA E7 products. Henderson told attendees that the API CK-4 specification is slowly appearing and that API CJ-4 is positioned with large accounts. The region still has considerable demand for lower-tier products, he noted, because the shift in performance is a slow process.

Some demand is seen in Brazil, Argentina and Chile for heavy-duty oils that are low in sulfated ash, phosphorus and sulfur, collectively referred to as SAPS, to be aligned with the Euro V specification, he added.

Engine oil quality in Latin and South America is still evolving, he said, with a gradual trend towards todays high performance engine oil specifications. You can still see that there is a significant volume or percentage of that lubricant demand that is being met by lower qualities, Henderson said. That may be more urban versus suburban utilization, but there is still a lot of old equipment there that is being serviced with older quality lubricants.

As those transitions occur, that will impact the selection of base oils required to meet those performance requirements, he said. So a gradual trend to higher performance is expected to support a transition from Group I to both Group I and III base oil in Latin and South America.

Vehicle production provides a significant part of the regional economy in the entire Americas region, with Mexico and Brazil being the second- and third-largest producers, behind the United States, Henderson said.

As we see more and more cars put on the road, they all need higher performance lubricants – with low viscosity, higher performance levels – that impacts the selection of base oils that we require for them, Henderson said. So were seeing continued increase in demand for Group III in both North America and South America segments, partly to support the factory fill and service fill requirements for the automotive industry.

Synthetics represent a growth opportunity for Latin and South America, he said, while also increasing demand for Group III base oil. As we move forward over the next half dozen years or so, we will continue to see growth in utilization of these low-viscosity, higher performing synthetic and part-synthetic lubricants, mostly to support the automotive sector in the Americas region, including South America and Latin America, Henderson said.

Brazilian original equipment manufacturer recommendations for passenger car motor oil predominantly call for SAE 5W or 0W type products, which he pointed out would need to be formulated with Group III, Group III+ and some Group II+ base oils. Theres high demand for hydroprocessed and high [viscosity index] base stocks, Henderson added. You can see the same in the North American region and the same in Mexico – high demand for these materials, and we need to have the right raw materials to support that.

The region is expected to experience a slow but gradual growth in multigrades and lower SAE grades over about the next dozen years, Henderson said. In both the passenger car side and heavy-duty side for Latin and South America there is going to be a continuing shift in transition, in terms of both performance and in terms of both SAE grade, he said, noting that the similar transition in SAE grades took time to occur in North America and in other regions.

Were going to see the same thing in Latin and South America – it will take time, but it will occur. It will just occur at a slightly slower pace than what we see in other regions.

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