With approximately 45 percent of the worlds finished lubricants consumption volume, Asia-Pacific is a crucial region for additives suppliers, but the barrier-to-entry is extremely high, Kline & Co. advised.
At the Union of the European Lubricants Industry (UEIL) Congress in Malta last month, Milind Phadke, a director in the firms energy practice, highlighted points from the U.S.-based consultancys upcoming report on the global lubricant additives market.
While global finished lubricants demand – and Asias, in particular – is growing, it is also changing as key demand drivers evolve, Phadke noted. Additive package blenders must have a deep understanding of what the market needs are and what original equipment manufacturer needs are, he said. They must be on top of the developing engine technologies and emission control strategies being implemented, and have know-how of all the various additive components available – then, they must be able to test formulations and get them to market.
This segment has a very high barrier to entry, and as a result we see primarily four companies [Lubrizol, Infineum, Afton Chemical and Chevron Oronite] throughout the world, he continued. This is changing, with some suppliers coming from China and [other parts of Asia], but its proving very difficult for them to break into this space.
Yet meeting the markets needs for additives will certainly prove fruitful, Phadke said. In 2014, the Asia-Pacific region accounted for up to 45 percent of the worlds finished lubricants demand. Through 2019, the Asia-Pacific market will increase at a compound annual growth rate of 1.9 percent per year- almost double the worldwide growth rate, and only surpassed regionally by the 3 percent growth rate of Africa and the Middle East combined.
Global additives consumption volume has typically followed closely behind that of finished lubricants, Phadke noted. In the aftermath of the global recession, however, additives growth per year began overtaking that of finished lubricants.
In 2014, additives constituted an estimated 11 percent of the worlds 39.4 million tons of finished lubricants consumption. Through 2019, though, the worlds lubricant demand will grow at a rate of 1.2 percent while additives will grow at 1.6 percent, according to Klines forecast.
The U.S. consulting firm attributes this phenomenon to the growing demand throughout the world for better quality lubricants. Lube formulators need to provide fluids that are compatible with a new wave of emission control devices and more efficient and cleaner-burning fuels, all while operating for longer drain intervals and in harsher conditions.
The entire global market is shifting – in some places slowly and in others rapidly – from API Group I to Group II, Group III and synthetic base stocks, which perform better in many finished lubricants, he said. But formulators are also looking to meet these more stringent demands with higher additive treat rates.
In the passenger car motor oils segment, that means increased reliance on friction modifiers and antioxidants as the markets uptake of lighter-viscosity products, such as 5Ws, jumps from 30 percent of the worlds top 15 markets in 2009 to 40 percent in 2024.
For heavy-duty motor oils, demand for antioxidants, corrosion inhibitors and viscosity index improvers will increase significantly – at compound annual growth rates of around 1.5 percent over that of the overall finished lubricants market.
Metalworking fluids and general industrial oils segments need to comply with stricter health, safety and environment regulations while also accomodating new machining techniques and vegetable- and other bio-based feed stocks.