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September 9, 2015

Volume 17 Issue 52

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Forecast Sees Slow Ramp-up in Demand

Global lubricant demand – including process oil and marine engine oil – is projected to grow about 1.5 percent per year to 42 million tons by 2019, up from just over 39 million tons in 2014, according to consultancy Kline & Co.

George Morvey, industry manager for Kline’s Energy Practice, said during a webinar yesterday that Shell remained the top global supplier of finished lubricants last year, followed by ExxonMobil, BP, Total, Chevron, PetroChina, Sinopec, Idemitsu, JX Holdings and Fuchs. Ranking 11th through 20th were Lukoil, Petronas, Valvoline, Gulf Oil International, Pertamina, Phillips 66, Indian Oil, Gazpromneft, Hindustan Petroleum and Petrobras. These 20 global suppliers together accounted for 64 percent of total lubricants supply in 2014.

Global finished lubricant demand declined slightly from 39.5 million tons in 2013 to 39 million tons in 2014. Kline attributed the lower overall 2014 volume primarily to demand declines in China, Russia, Brazil and Thailand.

In regional terms, Asia-Pacific led with 44 percent of global demand in 2014, Kline found, followed by North America with 23 percent, Europe at 17 percent, Africa and the Middle East with 8 percent, and South America at 8 percent.

The United States remained the largest lubricant consuming country market in 2014, according to the Parsippany, N.J.-based firm, though its lead over China continued to shrink. They were followed by India, Russia and Japan.

Automotive engine oil – including passenger car (21 percent) and heavy duty (23 percent) – accounted for 44 percent of lubricants demand, followed by other automotive oils at 9 percent, hydraulic oils and industrial engine oils at 8 percent each, general industrial oils with 7 percent, metalworking fluids at 6 percent and grease with 3 percent.

On the consumer side, Morvey said the good news globally for lubricant suppliers is demand for high performance, low viscosity passenger car motor oil is expected to accelerate in both developed and, more importantly, developing country markets. “It’s really widespread availability of quality base stocks – [API] Group II, II+, III, III+ – that is enabling more and more suppliers to upgrade their product portfolios,” he said. “In some cases maybe the product demand is not there, but the widespread availability of these base stocks at affordable prices is really what’s driving the improvement.”

Another driver is original equipment manufacturer technical demand in both developed and developing country markets. “OEMs are changing their factory- and service-fill recommendations, and that’s really pushing demand for lower vis grades,” he said. “New industry specs, changing consumer perceptions and maintenance practices – these are some of the things pushing the market.”

He said the market for heavy duty motor oil is not as dynamic as for passenger car motor oil. Morvey noted an exception is an evolving shift to SAE 10W-30 – away from the leading 15W-40 viscosity grade – in both conventional and synthetic formulations among certain fleets.  “These fleets are looking to improve fuel economy at comparable cost to 15W-40 – they are not making the shift to full synthetic,” he said.

Morvey noted that in developed countries, commercial fleets are more likely to look to extend oil drain intervals, follow vis grade recommendations, own more modern equipment and operate on quality, reliable fuels. “Because of these drivers, these are the types of fleets that would look to use a viscosity grade that meets OEM recommendations, and also one that meets current [American Petroleum Institute] categories.”

In developing country markets, diesel fuel quality issues are quite common, he noted, and can have a big impact on oil drain intervals and vis grade choices. In some such countries, diesel fuel prices may be subsidized, he pointed out, which effectively eliminates the motivation for an individual fleet operator to improve fuel economy.

Operating conditions are more severe in such countries, Morvey noted, which can lead fleet operators to change their oil more frequently and thus not feel the need to use synthetic heavy duty engine oil or follow more sophisticated maintenance practices.

Kline’s report is titled, “Global Lubricants: Market Analysis and Assessment.”