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April 26, 2019

Volume 7 Issue 3

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Group II, III Demand to Rise in India

MUMBAI, India – Demand for API Group II and III base stocks in India will rise as the market shifts toward better quality lubricants, an industry expert said.

The Indian market is moving fast along with global trends of greater Group II and III demand, while thirst for Group I has started to decline, Anuj Kumar Singh, a project manager in Kline & Co.’s energy practice, said at the ICIS Indian Base Oils & Lubricants Conference held here earlier this month.

Singh noted that increasingly stringent emission norms, changing original equipment manufacturer recommendations for finished lubricants, growing fuel efficiency standards and better blending flexibility due to advancement in additive technology are some of the factors that will boost sales of high-quality base stocks in India in the next 10 years.

The convenient availability of high-quality base stocks near the country due to new capacities in the Middle East, Southeast Asia, as well as competitive prices, will also aid the growth of Group II and III base stocks, he stated.

“A lot of new options for high-quality base stocks have emerged around the Indian subcontinent, providing flexibility to Indian blenders in sourcing their products. This is even more important, given that the Indian market is making strides toward better-quality lubricants,” Singh said. He noted new capacity in Europe can alter Group II trade flows, diverting some of the European imports to markets like India.

The Indian market has almost completely transitioned from use of Group I toward Groups II and III in the passenger car motor oil segment, Singh said. Group I base stocks were in high demand in the heavy-duty motor oil segment until a few years back, but there too has been a significant transition towards Group II base stocks. However, Group I base stocks remain in high demand for industrial engine oil, general industrial oils, metalworking fluids and greases, according to the United States-based consultancy.

Singh projected Group III to grow the fastest in India through 2028, although from a smaller base, while Group II will see decent growth. He added that demand for naphthenics – which are primarily used in applications like metalworking fluids, greases and process oil – will also grow during the period, but the market for Group I will shrink. Singh did not provide precise estimates of India’s demand for different grades of base stocks.

India’s base stock demand was estimated at 3.7 million to 3.8 million metric tons in 2018, with Group I accounting for one-third of the market share. Group II had the largest market share, while Group III and naphthenics had a small market share. Of the total Group II imports, a significant portion is accounted by lighter viscosity grades which are primarily consumed in non-lubricant applications.

Singh noted the country has a deficit of base stocks and relies on imports to meet its domestic requirements. The country imported about 2.6 million to 2.7 million tons of base stocks in 2018 from South Korea, Singapore, Saudi Arabia, the United States, Spain, the United Arab Emirates, Bahrain and Iran, among others.

“With no new capacity expansion or growth in India, the country will increasingly rely on base stock imports, particularly on newer supply sources,” he said.

India, the world’s third-largest lubricant market, has four mineral base oil plants with combined capacity of about 1.2 million t/y. Hindustan Petroleum has 41 percent of this capacity, Indian Oil Corp. Ltd. 21 percent, Bharat Petroleum Corp. Ltd. 15 percent and Chennai Petroleum Corp. Ltd. 23 percent, according to Lubes’n’Greases 2018 Guide to Global Base Oil Refining.

Singh projected that SAE 5W-XX engine oils will be the fastest growing viscosity grade in India’s passenger car segment through 2028. He noted that SAE 0W-XX oils will also experience growth during that period, but the pace will be slower, while SAE 15W-XX demand will shrink. For HDMO viscosity grades in India, Singh said demand for 15W-XX will increase, while 20W-XX and monograde demand will decline.