December 31, 2014
Volume 17 Issue 52
Spain Looks to Place its Surplus
MADRID – Despite its recovering economy, Spain’s robust capacity for producing base oils and finished lubes far exceeds the country’s demand. With the pattern set to continue, the Iberian nation's suppliers look to increase exports to northern Africa and elsewhere.
Although Spain’s economy took the global financial crisis hard, it’s now showing signs of improvement, according to Álvaro Diaz, Repsol’s industrial lubricants manager. Industrial production is up and the nation posted its third consecutive quarterly gain in the first quarter of 2014, with gross domestic product likely to expand 1.5 percent this year and another 1.7 percent in 2015, Diaz said here recently at the annual congress of the Union of the European Lubricants Industry.
Spain is the second largest vehicle producer in the European Union, behind only Germany, Diaz told the UEIL. Thanks to recent changes in Spain’s employment laws, it’s once again attractive –for the first time since before the recession –to invest in vehicle manufacturing in the country, and foreign makes like Renault and Nissan are increasing their investment in Spanish production. The country’s vehicle fleet hit a pinnacle of around 30 million units in 2008, but stagnated for years before it began recovering in 2013.
However, the nation’s construction sector virtually collapsed as a result of the recession and remains dilapidated, significantly contributing to the country’s 25 percent unemployment rate.
Despite an economy that is mostly – even if only marginally – improving, domestic demand for base oils and finished lubricants is nowhere close to the nation’s production capacity, Diaz pointed out in his Oct. 24 presentation. Spain produced around 400,000 metric tons of conventional base oils in 2013. That made for an approximately 84 percent utilization rate of its total capacity, which was assessed at 475,000 tons per year through October.
Currently having a 6 percent share of Europe’s total base oil supply, Spain’s contribution will be closer to 13 percent in 2015, thanks to what Diaz called a dramatic increase in production capacity that is now in place. Repsol and SK Lubricant’s joint venture, Iberian Lube Base Oil Co., opened in mid-October with capacity for 630,000 t/y of API Group II and III base oils. Located at Repsol’s Cartagena refinery, Ilboc will double Europe’s existing Group III output, Diaz said.
Spain has been glutted with domestically produced base oils since 2010, and with production growth in 2013 plus the Ilboc barrels, is now in a considerable oversupply situation, he acknowledged. Spain also has five “sizable” base oil rerefineries, for another 125,000 t/y of capacity. Sigaus, the national body that oversees collection of used industrial and automotive lubricants, reported that 103,000 tons of used oil was collected in 2013. Of that, 48,000 tons were burned for fuel and 55,000 tons were rerefined into base oil.
Turning to finished lubricants, Diaz said Spain’s 10 major blending plants have an estimated capacity of 739,000 t/y. The country’s demand for finished lubricants was around 361,000 tons in 2013 (a 1.4 percent gain over 2012), and first-half 2014 demand was 3 percent higher than in the year-earlier period.
Nevertheless, the in-country market is still 35 percent below its 2007 peak, when demand was 549,000 tons. Grease demand is off 60 percent since 2007, industrial oils shrank 44 percent, and transportation oils are down 37 percent. Demand for marine lubricants and process oils also fell by double-digits.
These factors have led to a spike in finished lubricant exports, Diaz said, with Aselube, the Spanish Association of Lubricants, reporting that the country exported 170,000 tons of finished lubes in 2013, up 4.5 percent from the year before. Sixty percent of exports went to Europe and 12 percent to the Americas. A considerable portion also went to markets in North Africa, particularly Morocco, which Diaz noted as being important destinations for the nation’s future exports.
Transportation lubricants, he added, represent 45 percent of Spain’s lubricants market, industrial oils are 38 percent, and marine lubricants are 7 percent. Just 2 percent are greases, and the remaining 8 percent are process oils.
In the transportation sector, passenger car motor oils comprised around 40 percent of demand in 2013, and heavy-duty engine oils represented 37 percent. The share of synthetic and semi-synthetic oils is continuing to rise though, and now approach 56 percent of engine oil sales, up from 48 percent in 2009 and 15 percent in 2001.
Demand for industrial lubricants such as hydraulic oils, metalworking fluids, process oils and transformer oils improved modestly in 2013 to about 160,000 tons, but are still a far cry from pre-crisis levels.
Overall, finished lubricants demand will continue to fall in the coming years, Diaz forecast, but at a less-precipitous 1.5 percent a year. Total lubricant sales in Spain are projected at approximately 335,000 tons for 2018, he added.
While Ilboc’s new refinery will fulfill Europe’s need for Group III, he concluded by noting that Spain’s producers of base oils and finished lubricants will continue to rely heavily on exports, especially to North Africa.