January 30, 2018
Volume 3 Issue 7
Brightstock Demand to Dwindle
Global bright stock demand sat at 2.7 million tons in 2017, but is expected to decline by roughly 250,000 tons by 2027, Kline & Co. said in a webinar last week. Europe accounts for around 10 percent to 12 percent of global demand, and its consumption is expected to decrease at an average annual rate of 0.1 to 0.2 percent, while Africa and the Middle East account for 12 percent to 15 percent and should increase at an annual rate of roughly 0.5 percent.
“Conventional API Group I bright stocks, which are made at Group I refineries, make up about 85 to 90 percent of demand, with Group V, or naphthenic, bright stocks and alternate bright stocks, which include Group II and other processes that involves processing a naphthenic crude but producing a product that matches at least Group I quality, making up the remaining demand," said Project Manager Anuj Kumar.
The global bright stock market is slightly oversupplied, with supply sitting at roughly 2.8 million tons. The surplus is primarily due to declining demand for bright stock use in automotive engine oils in developed countries.
“While on the overall level the bright stock market appears to be balanced, there are regional supply-demand imbalances,” said Kumar during Wednesday’s webinar.
Bright stocks are underrepresented in Europe, with the region making up just over 10 percent of global bright stock demand despite Europe’s nearly 20 percent share of global finished lubricant demand. Africa and the Middle East, however, holds 12 to 15 percent of global bright stock demand, but only 10 percent of global finished lubricant demand.
Currently, Europe is operating at a nearly 400,000 ton surplus, while Africa and the Middle East are experiencing a combined deficit of about 110,000 tons. Some of Europe’s oversupply is exported to Africa and the Middle East to ease the undersupply issue, according to Shefali Katyal the lead consultant on the bright stocks project.
“Bright stock is underrepresented [in] lower penetration of monogrades and heavier multigrades, both in passenger car motor oils and heavy-duty motor oils, which require higher quantities of bright stocks,” said Katyal. “In several markets in Western Europe, the demand for monograde engine oils is almost non-existent. This results in very low demand for bright stocks in these applications.”
Monograde engine oils account for most of engine oil demand in Africa and the Middle East, however, “as monograde engine oils require bright stock as a key component of its formulation, demand for bright stock is high,” Katyal noted.
In the global market, bright stocks are underrepresented in automotive engine oils, but overrepresented in industrial and automotive gear oil applications, as well as marine oils and greases.
Although passenger car motor oils make up approximately 22 percent of global finished lubricant demand, the product takes up a mere 5 percent of global bright stock demand. In contrast, automotive gear oils accounts for about 4 percent of global finished lubricant demand, but almost 20 percent of global bright stock demand.
“The slower rate of finished lubricant demand growth and swift quality shifts in automotive engine oils worldwide will result in a net decline in demand for bright stocks,” noted Kumar in his presentation. Although bright stock demand for automotive gear oils, greases and process oils is expected to increase, and bright stock demand for marine oils and industrial gear oils is predicted to remain the same, the demand decline in bright stocks for automotive engine oils is significant enough to cause overall demand to decrease.
A major challenge to the bright stocks market is Group I plant closures. Between 1.3 million tons and 1.4 million tons of bright stock capacity has shut down across the globe since 1997. “Over the past 20 years, bright stock supply has been an inevitable casualty of Group I rationalization due to technical changes in finished lubricant quality and burgeoning Group II/III supply,” said Kumar. In Europe nearly 500,000 tons of bright stock capacity has shut down since 1997, and 200,000 tons of bright stock capacity has shut down in Africa and the Middle East.
Because of growing Group II and Group III competition, Group I plants are being forced to operate at lower rates, hindering conventional Group I bright stock production, especially in Europe. Group I base oil demand took up 65 percent of global demand in 2007, but decreased to 39 percent of demand by 2017, according to the Lubes’N’Greases Factbook.
“In Africa, the region simply doesn’t have enough bright stock producing plants, and those that are operating are grappling with several issues, like frequent maintenance shutdowns (as these plants are quite old) [and] cash issues faced by some companies,” said Katyal in an interview. “In the Middle East region, [the] bulk of bright stock supply comes from Saudi Arabia and Iran,” she noted.
Bright stock supply is expected to decrease by 10 percent to approximately 2.4 million tons per year by 2027. The bright stocks market will see a net deficit of between 250,000 tons and 300,000 tons by 2027, forecasts Kline. “This shortfall represents the combined effects of the curtailed demand for heavy and monograde engine oils, increase in demand for industrial oils and process oils, supply erosion resulting from Group I plant shutdowns/conversions and increased supply from Group V and alternate bright stock plants,” said Kumar.
Other alternatives will have to cover the gap, and Kline believes polyisobutylenes are the best suited to address the impending deficit. PIBs are a favorable alternative in terms of availability, technical suitability and volume savings, and moderately suitable price wise. Kline also found high-viscosity polyalkylene glycols to be moderately suitable alternatives, faring well in all categories but price.