The stabilizing global economy will result in lubricant demand remaining flat at around 40 million metric tons by 2020, but demand in Africa should continue growing, Geeta Agashe of Geeta Agashe & Associates LLC said at the ICIS African Base Oils and Lubricants Conference. She noted that sub-Saharan Africa has a lot of growth drivers, citing, among other factors, population growth that will increase the number of consumers and a growing middle class as economies in the region expand.
Agashe also noted that vehicle parcs are set to increase significantly. In addition, key industries such as agriculture, construction and mining will see increased mechanization, and many countries have initiated projects to improve infrastructure.
Globally, the lubricant industry is not going to grow. At best, it may enjoy 1 percent growth overall, keeping in mind that global [gross domestic product] growth is forecast at about 3 percent to 4 percent, Agashe said in a separate interview. But this is not true for sub-Saharan Africa. We are optimistic about lubricant growth prospects [there].
The countries … we are more optimistic about include Kenya, Tanzania, Ethiopia, South Africa and Nigeria. They all show very good prospects. North and South Sudan will also be good prospects after those countries can focus on the future, she added.
Emmanuel Ekpenyong, head of lubricants for Honeywell Oil and Gas in Lagos, Nigeria, concurred that lubricant demand will remain positive in Africa until 2020. This is because Africa has an annual growth rate of about 5 percent, and as the economy of the continent grows, factories will be set up, and roads, bridges and buildings will be built, said Ekpenyong.
As a result, he continued, demand for lubricants will continue to grow proportionately. Over the next few years, I foresee tremendous growth in East and West Africa – and those markets should be watched for reasonable lubricant demand [growth].
Richard Mugambi, lubricant sales manager in Kenya for Gulf Energy, agreed. Economic reports by the International Monetary Fund, World Bank and various regional bodies indicate that all regions within Africa will continue to grow at rates that are above the global average, he said. These growth rates are supported by infrastructure developments, some of which are regional projects that include roads, sea ports and energy. All these factors have an influence on lubricant demand and will continue to grow.
Agashe said that forecasts for synthetic demand growth in the African are not as positive as in other parts of the world. I dont think this market is ripe for synthetics yet because of the higher prices; customer perceptions that thicker oil is better; and that the hot, dry conditions and poorly paved roads might not be suitable for the use of synthetics, said Agashe.
Most importantly, the vehicle parc in most of sub-Saharan Africa consists of older vehicles, she noted. However, Agashe added, a small niche of innovators and early adopters are already using synthetics in automotive as well as certain industrial applications.
Mugambi echoed that thought, saying, We are likely to see growth in high-performance lubricants, driven by increased disposable income and advanced technology. As we continue getting high end motor vehicles in Africa, demand for synthetic lubricants will grow.