December 20, 2017
Volume 17 Issue 52
Industrial Oils to Remain Flat
Global demand for general industrial lubricants and grease is expected to remain stagnant though 2021, hovering around 6.4 million tons, said Kline & Co. in a webinar last week.
Over the past five years, general industrial oil and grease demand has declined slightly, but has remained in the 6.4 million to 6.5 million ton range, according to Kunal Mahajan, project manager for the Parsippany, New Jersey-based consultancy. He noted that demand for some oils, such as turbine and circulating oils, compressor oil and refrigeration oil, has increased, while demand for other oils – like hydraulic fluid and industrial grease – has declined.
Currently, hydraulic fluids dominate the segment, accounting for more thanr 50 percent of industrial oil and grease demand in 2016. Hydraulic fluids are used across various industries in equipment such as forklifts, cherry pickers, metal rolling and hydraulic pumps and motors.
Gear oils and turbine and circulating oils each make up roughly 15 percent of the segment – for a total of 30 percent – followed closely by grease, at around 10 percent. Compressor oil and refrigeration oil share the remaining demand.
At present no industry’s industrial oil and grease demand accounts for more than 15 percent of the market. General manufacturing, primary metals, mining and transport equipment manufacturing share nearly 50 percent of demand. Kline did not share specific numbers.
Asia-Pacific, with its many developing markets, dominates, holding approximately 45 percent of global demand. The region is followed by Europe and North America, with nearly 15 percent each, with South America and the rest of the world at roughly 7.5 percent of demand.
Kline, however, anticipates demand in Asia-Pacific to decline because of shutdowns in excess capacity in the primary metals and mining industries in China, and industries in Japan shifting operations overseas.
Europe will see a minor demand growth coming out of Russia and Turkey. “In Russia, growth in mining along with growth in manufacturing, mainly due to import substitution initiatives, such as [the] Development of Transport Program focusing on developing transportation infrastructure and [the] Shipbuilding Industry Development, is expected to drive the demand for general industrial oils and grease in the country. In Turkey, demand is expected to grow as its economy grows,” said Mahajan in an interview.
South America, Africa and the Middle East will be the fastest growing regions at a compound annual growth rate of nearly 2 percent through 2021. As Brazil recovers from its 2015 and 2016 recession, the economy will grow, “leading to increased demand for general industrial oils and grease in the country,” noted Mahajan. He continued, “Saudi Arabia is investing to develop manufacturing industries in the country, which will lead to higher demand for general industrial oils and greases.”
Decline in North American demand is a result of lessening demand in the United States, the region’s largest market. “In the U.S.,” explained Mahajan, “end-users are increasingly adopting better quality oils and fluid management services that are resulting in the decline in the demand for general industrial oils and grease.”
On a global scale all general industrial oils are expected to enjoy slight growth, all under a CAGR of 1 percent. Grease, however, will see a CAGR decrease of around 1 percent through 2021. Mahajan cites three major factors contributing to this decline.
“First is the decline in demand from primary metals and mining industries, two of the largest grease consuming industries,” he said. “Secondly, end-users are shifting towards high-performance greases leading to overall decline in demand for grease. Thirdly, increasing use of over-greasing prevention methods, such as better greasing techniques; use of automated greasing systems; and filled-for-life bearings will also result in the decrease in the overall grease demand globally.”
Synthetics will continue to penetrate the market, thanks to factors such as extreme operating conditions and equipment modernization.
For example, some modern equipment, like new hydraulic equipment, have lower fluid volumes with respect to pump flow rate, and operate under high temperatures and pressure. “Under such extreme conditions mineral-oil based products tend to break down, resulting in the precipitation of contaminates. Therefore, end users are moving towards synthetics in modern equipment,” asserted Mahajan.
Synthetics will grow most in turbine and circulating oil, at a CAGR of about 3.5 percent through 2021, followed by refrigeration oil at a CAGR just under 3 percent and gear oil hovering around a CAGR of 2 percent.
Mahajan believes the higher use of synthetics, using recycled lubricants and fluid management services may slowdown demand; however, the swift growth of synthetics over mineral oils in all product categories offers a new opportunity to the market.