September 5, 2017
Volume 7 Issue 7
India’s White Oils Competition Intensifies
Competition is set to intensify among Indian white oils suppliers with Indian Oil Corp. Ltd.’s entry in the market, as the state-run company is not only looking to target domestic customers, but also plans to tap export markets.
“Private oil companies are importing base oils from other countries to manufacture [liquid light paraffin] in India. IOCL is the first company having its own raw material in eastern India,” said a spokesperson for IOCL, which launched its white oils product under the Servo Whitepol brand in July. Using its own base oils as feedstock may result in better margins and give IOCL a competitive edge, he added.
Indian companies such as Savita Oil Technologies, Raj Petro, Gandhar Oil Refinery Ltd., Apar Industries, Bharat Petroleum Corp. and Columbia Petro Chem currently import API Group II and Group III base oils to make white oils that cater to the needs of domestic and export markets. India is a net exporter of white oils, which are used for applications ranging from cosmetics and pharmaceuticals to spray oils and adhesives.
“Bharat Petroleum Corp. Ltd. is already marketing white oils, and this has not had a detrimental impact on the other suppliers," Sushmita Dutta, a project manager for United States-based consultancy Kline & Co., told Lube Report Asia. “However, entry of IOCL will intensify competition in the market.”
Both BPCL and IOCL have the advantage of in-house base oil supply and are recognized as the leading suppliers in the Indian lubricants market, enjoying the trust of end users in many industries, Dutta said. “They can bundle their lubricants and process oils together while serving their industrial customers,” she added.
Dutta, however, expects existing suppliers to continue to operate in this space, thanks to a large and expanding white oils market, longstanding relationships with their consumers and because these companies’ business is not dependent solely on the domestic market. Furthermore, India has a gray market for white oils, giving suppliers an opportunity to convert users of very low-quality oils to higher-quality products.
The domestic market for white oils is estimated to be between 200,000 to 300,000 metric tons per year, according to Kline. The largest end use is the hair oil market, which is a part of cosmetics and personal care industry. Cosmetics and pharmaceuticals account for three fourths of the market.
IOCL will offer both Indian Pharmacopoeia Commission-approved grades of white oils and non-IP-grade oils beginning in January, though its own base oils are currently capable of making only the latter. “We expect to market IP grade oils with imported base oils from January 2018 onwards, and our Haldia Refinery is expected to manufacture base oils meeting IP grade requirements by the end 2019,” the spokesman said.
IP-grade liquid light paraffins essentially cater to hair oil and pharmaceutical industry applications, a market that has potential to continue growing to reach a volume of 500,000 tons per year, according to the IOCL representative. Non-IP grade caters to non-critical applications in the plastic industry, incense manufacturing, shoe polishes, petroleum jellies. Its market potential is around 70,000 t/y, IOCL said.
Apart from targeting domestic customers, IOCL has set its eyes on the overseas market for its white oil products. “We are also planning exports to Bangladesh and Nepal initially,” the spokesman added.
IOCL, which sells Servo-branded lubes, also has plans to expand its base oil production capacity to meet rising demand in terms of volume and quality. It plans to double its capacity for lube base oils by 2022 at its Haldia and Panipat refineries. The company currently produces approximately 200,000 t/y at its Haldia Refinery.