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May 31, 2019

Volume 7 Issue 7

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Chinese Auto Segment Grows Modestly

Suzhou, CHINA – Overall lubricant production in China has flattened in recent years, but output of automotive lubes continues to expand, and imports are still swelling, as are sales by first- and second-tier suppliers, an official from one independent marketer told a recent industry conference.

The nation’s automotive fleet is relatively young and trending still younger, which bodes well for demand of higher quality products, Lopal Technology Co. Chairman and President Shi Junfeng said here at Enmore’s China Lubricant Market Focus on April 17. At the same time, competition is fierce and engine oil prices fell in 2018.

Finished lubricant consumption in China increased 0.7 percent in 2018 to 7.2 million tons, Shi said. That marked the third consecutive year of slight gains, though demand is practically to the level of 2016. Production of industrial lubricants declined 1.3 percent last year to 3.6 million, but the automotive lubricant segment expanded 0.3 percent to 3.6 million tons and is up nearly 10 percent the past three years. Shi predicted the latter trend will continue.

“The vehicle retention rate in China is increasing, so [demand for] automotive oils is increasing steadily,” he said.

Automobile sales in China rose sharply the past decade, although they dipped in 2018, so the average age of cars and trucks is significantly lower than in most developed countries. Shi noted that the average age of heavy trucks decreased from 5.9 years in 2016 to 4.6 years in 2018.

“That represents a drop of 22.8 percent in two years, indicating that many people tend to replace old vehicles with new vehicles,” he said.

Top-tier lubricant brands held 19.5 percent of the overall market in 2018, up from 17.4 percent the previous year. The share for second- and third-tier suppliers also rose, from 4.5 to 5.1 percent and from 36 to 38 percent, respectively. The share of other companies fell from 41.1 to 37.5 percent, he said.

Lube imports to China are relatively low, but the level jump 24 percent in 2018 to 428,000 tons. “The main imported products are leading foreign brands like ExxonMobil, Shell and Castrol,” he said.

Shi described competition in the Chinese market as fierce and said that this contributed cuts in lubricant prices last year. Wholesale prices for full-synthetic passenger car engine oils meeting or equivalent to the American Petroleum Institute’s API SN specification dropped 7 percent, he said, while prices for semi-synthetic and conventional SN oils along with those meeting API SL fell between 2 and 3 percent.

Wholesale prices for heavy-duty diesel engine oils meeting API CF, CI-4 and CJ-4 also dropped between 0.9 percent and 2.9 percent. Prices for hydraulic oils increased less than 1 percent, while the trend for different types of gear oils was mixed.

Shi said the lubricant supplier base in China is consolidating, an assessment echoed by other speakers at the event. The industry continues to install additional blending capacity, though. Large marketers such as BP’s Castrol, Valvoline and China National Offshore Oil Co. are all building or expanding plants at the moment, and numerous Chinese independents have opened or expanded plants the past couple years.

The eastern and northern regions have the biggest concentrations of blending capacity, he said, accounting for 28 and 24 percent of capacity, respectively, he said.

“In recent years, due to strict environmental regulations in Shanghai and Beijing, more lubricant companies are choosing to open factories in Tianjin – for example, Chevron, Lopal and Castol,” he said.

 

Sinotruk display at Auto Shanghai show.

Photo: Imagine China/Newscom

Attendees visit Sinotruk booth during the 2017 Shanghai International Automobile Industry Exhibition, also known as Auto Shanghai. New purchases are reducing the average age of heavy trucks in China.