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January 3, 2020

Volume 7 Issue 8

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China Market Forecast to Shrink

Although China was the world’s second-largest lubricant market in 2018, it is expected to shrink by a compound annual rate of 0.3 percent out to 2023, according to a Kline & Co. study.

The Parsippany, New Jersey-based firm estimated that the planet consumed 40.5 million tons of lubricants in 2018, including process oils and marine lubes. The United States and China are by far the two biggest markets and therefore have the biggest impacts on volumetric global demand, product trends, supplier positioning, synthetic penetration and channel shifts, George Morvey, industry manager for Kline’s energy practice, said during a webinar on Dec. 11.

From 2018 to 2023, the firm forecasted, lubricant demand will grow at a compound annual rate of 2.1 percent in India, shrink at a rate of 1.1 percent in Japan, grow at a 1.9 percent rate in Indonesia, shrink at a 0.4 percent rate in South Korea and grow at a 2 percent rate in Thailand.

The United States was still the largest market, according to Kline’s estimates. India was third largest, followed in order by Russia, Japan, Brazil, Germany, Indonesia, South Korea, Mexico, Canada, the United Kingdom, Thailand, Nigeria, Turkey, France, Italy, Australia, Egypt and Saudi Arabia. Indonesia edged past South Korea for the eighth spot in 2018.

Top Suppliers

Kline’s estimated ranking of the top 20 global lubricant suppliers included two companies based in China, two in Japan, three from India and two from Indonesia.

Among Asia-based finished lubricant suppliers, Sinopec had the highest market share in 2018, Kline estimated, followed by PetroChina, Idemitsu Kosan, JXTG Group, Gulf Oil International, Pertamina, Petronas, Hindustan Petroleum and Indian Oil.

Monograde Trends

Kline projects that monograde lubricants will rapidly exit the market. “By 2028, less than 9 percent of the total demand for heavy-duty motor oil in these 20 top country markets will be monograde,” he noted.

The demand for monogrades will remain high in certain countries, he added. “Heavy-duty motor oil monograde demand in China will remain at 20 percent of their total demand, and even higher in Indonesia at just under 60 percent,” in 2028, Morvey said.

Many changes still have to take place for the transition away from monogrades to occur. “The vehicle parc continues to be modernized, and that’s what is driving movement away from monogrades into multigrades,” he said.

Governments Encourage Local Sourcing

Morvey noted the growing trend of government initiatives to encourage local sourcing of finished lubricants, citing Indonesia’s lubricant standard implemented this past fall.

“Indonesia’s Ministry of Industry implemented the Indonesian International Standard, known as SNI, on lubricants,” he said. “What it meant is that by September 2019 any supplier that produces, distributes or imports products in the market must comply with the SNI regulation. Which means they have to have an SNI certificate and display the logo on their products.”

He said the underlying goal is to promote the use of better quality products. “It’s also to reduce the impact of fake and counterfeit products, which is prevalent in [Indonesia] as well as in other parts of the world,” Morvey said. “The other aim by the government is to encourage foreign suppliers to set up domestic lube blend plants to encourage domestic production and more importantly, domestic employment in the lubricant space.”