SINGAPORE – With its economy forecast to grow robustly in coming years, one oil company predicted recently that India will be the fastest-growing lubricant market in the Asia-Pacific region. At the same time, lube demand will sag in the nearby Middle East, a senior official from GP Global said.
By 2021, Asia, Middle East and Africa together are expected to account for about 57 percent of global lubricants demand, Sudip Shyam, global head for base oils and BD lubricants of GP Global, told an audience last month at the ICIS Asian Base Oils & Lubricants Conference here. Asia-Pacifics share of lubricant demand will increase from 46.9 percent in 2015 to 49.9 percent in 2021, and the Middle East and Africa will increase slightly from 6.9 percent to 7.1 percent, he said. Demand in North America will decline from 23.1 percent to 21.1 percent and Europe from 16.9 percent to 15.9 percent. The percentages are based on data from GBI Research and IHS Global Lubricant Service.
The company forecasted that global lubricant demand will remain flat for the next five years.
India is the third-largest lubricant market after China and the United States. Demand for finished lubes – including automotive and industrial – is estimated at about 2.25 million tons per year, with automotive at 1.5 million tons per year, Shyam said.
Indias lubricant production volume is about 1.3 million t/y, based on Argus imports data. The market is expected to grow at about 4.2 percent annually. The country has about nine key players and still has room for more new players, according to Shyam.
Indias economic growth rate is expected to be about 7.5 percent from 2019 to 2021, according to the Economist Intelligence Unit and the World Bank. By 2030, the gross domestic product of Indias top five cities will be comparable to those of middle-income countries today. For example, Delhi will be comparable to the Philippines and Mumbai to Malaysia.
In financial year 2018, commercial vehicle sales in India crossed the one million unit market for the first time and grew 24 percent. Three-wheeler sales grew 24 percent and two-wheelers 24 percent, although passenger car sales were flat.
In contrast, in the Middle East, lubricant demand is expected to be about 2.8 million t/y, and it could remain flat or slightly negative in the mid-term, he said. Iran is the largest market, followed by Saudi Arabia, Turkey and Egypt.
In 2017, new vehicle sales in the region, excluding Iran, dropped 9 percent. Information from market sources indicate vehicle sales further declined in 2018, and sentiment remains subdued further into 2019, he added.
Due to falling vehicle sales, there is pressure on automobile companies to reduce cost, which is leading to a pushback on lubes and genuine oil prices, he said.
At the same time, auto lube buyers are driven more by cost of lubricant rather than total cost of ownership of vehicles, allowing in counterfeit and substandard lubes to make their way into the market, to the detriment of genuine blenders, he added.
However, the United Arab Emirates mandated the Emirates Quality Mark to ensure quality and this is expected to reduce selling of counterfeit lubricants, said Shyam.
Regular change of engine oils is also ignored by many consumers, leading to lower lubricant consumption, but higher vehicle repair costs for customers, he added.
Meanwhile, local governments show preference for state-owned companies lubricant when it comes to government projects. Abu Dhabi National Oil Co. and Emirates National Oil Co. in the U.A.E., and Oman Oil Co. in Oman are among the companies benefitting from this.