September 19, 2018
Volume 3 Issue 4
Scant Growth Forecast for North America
North America’s lubricant market is expected to inch up from 2.9 billion gallons in 2017 to 3 billion gallons by 2020, with industrial oils continuing to constitute the largest share, according to consultancy Kline & Co. Government policies, including potential changes to the North American Free Trade Agreement and new environmental rules in the United States, should spur growth in some cases and tamp down demand in others.
In 2017, industrial lubricant demand made up roughly 50 percent of the North American market, followed by consumer automotive lubes with around 30 percent of the market and commercial automotive lubes holding on to the remaining demand.
“We do not expect any major changes. [The] industrial segment is currently the leading segment, and will continue to be the leading segment until 2022,” said Sushmita Dutta, project manager at the Parsippany, New Jersey-based consultancy.
Process oils account for the largest share of the industrial segment – roughly 40 percent, Kline estimates. General industrial oil hold approximately 25 percent, followed by industrial engine oils and metalworking fluids with almost 13 percent each, and grease accounting for the rest.
Passenger car motor oils and motorcycle oils account for a combined 90 percent of consumer automotive lubricants, followed by automatic transmission fluid with about 5 percent. Other engine oils and grease make up the rest.
Heavy-duty motor oils hold most of commercial lubricant demand, with a nearly 60 percent share, followed by hydraulic and transmission fluids at roughly 25 percent combined.
“Major oil companies’ branded sales account for 40 percent to 45 percent of the total North American [lubricant] demand in 2017,” Dutta said during a webinar presentation.
Shell is the largest supplier to the U.S. market, followed by ExxonMobil and then Chevron. In Mexico, ExxonMobil leads, with Shell following closely behind and Mexlub taking third place. HollyFrontier is the Canadian market leader, followed by ExxonMobil and then Shell. This is not expected to change through 2020.
Mexico’s market will continue to slowly grow over the next two years, despite a slowdown in many of the country’s manufacturing sectors, such as automotive, food processing, metals and machinery industries.
“The lubricants market in Canada is expected to contract slightly over the next five years, primarily due to increased use of synthetics, extended oil drain intervals and the adoption and penetration of electric vehicles in the vehicle parc in the consumer and commercial motor segments,” Dutta told Lube Report in an interview.
Mexico and Canada combined make up roughly 13 percent of the North American market, with the U.S. contributing the lion’s share of 87 percent. This, too, will continue over the next two years.
The U.S. consumes 2.1 billion gallons of lubricants per year, according to Kline’s estimates. Industrial lubricants make up roughly 1 billion gallons, followed by consumer automotive lubes at around 600 million gallons and commercial automotive at roughly 500 million gallons, Kline estimated.
U.S. government actions are aiding the overall business environment, leading to increased lubricant demand across the country, Kline concludes. “Initiatives such as the Fixing America’s Surface Transportation Act [are] driving funding for highway and street construction,” Dutta noted.
Other examples spurring demand for industrial lubricants include Maryland’s Transportation Infrastructure Investment Act of 2013, an increased gas tax in Montana that will contribute to highway construction and legislation passed in California to help raise $1 billion for the state’s active transportation fund.
Additionally, U.S. President Donald Trump’s decision to exit the Paris Climate Agreement has enabled coal-based power plants to operate without reducing their emissions, which is likely to result in the growth of coal mining, an otherwise ailing industry, Dutta added.
On the other hand, the renegotiation of NAFTA is likely to have a negative impact on lubricant demand in Mexico and Canada. “Mexico exports most of its automotive production to the U.S., its leading partner in NAFTA. Mexico’s automotive sector could suffer a severe setback as a result of the NAFTA renegotiations proposed by the U.S. administration,” Dutta explained.
She continued, “Similar to Mexico, Canada’s manufacturing sector growth is linked to its trade relations with the U.S., and NAFTA renegotiations are creating uncertainty about future growth prospects of the industrial sector.”