Lubricant demand stalls in mature markets, growth ahead in emerging markets
Despite the challenges of a precarious economic environment, the 2011 global lubricant market grew a resilient two per cent, with global lubricant demand estimated at 38.6 million tonnes. This growth was largely fuelled by the BRIC countries’ resurgent industrial activity and expansion in the commercial and passenger vehicles sales, according to the recent Global Lubricants: Market Analysis and Assessment report by international consulting and research firm Kline & Company.
The United States remains the largest lubricant market, but its near 22-per-cent global share continues to decrease. China and India are the next biggest markets with a combined total of over 26 per cent, with Russia’s consumption expected to surpass Japan’s and consequently be the fourth largest market. Aside the BRIC countries, strong growth is also expected in Indonesia, South Africa and Malaysia, driven by an increase in new vehicle ownership and production, construction and industrial activity, especially in the power-generation and oil & gas production sectors.
The core of competition has evolved to be on a value chain basis and is most intense between multinationals and local majors in most developing countries. On the global level and an overall volume basis, Shell has maintained its leadership position in 2011 with a 13-per-cent market share, as well as leading in the branded lubricants category. The company continues strengthening OEM relations, critically with Chinese OEMs, and is successfully promoting its products through OEM service fill recommendations. ExxonMobil and BP follow with 10 and seven-per-cent shares, respectively. The United States remains Shell’s key market overall with some improvement in sales seen. By focusing on their brand and value-led segments, Shell is expected to maintain their No. 1 position globally, increasing its leading position in its key market of the United States, and critically in the key growth markets of the Asia-Pacific region.
Mark Gainsborough, executive vice-president for Shell Global Commercial, notes, “Our lubricants business strategy is focused on brand and value. We have a strong supply chain, a portfolio of world-class brands and products, and we invest in technical innovation. Moreover, we develop genuine partnerships, put the customer at the heart of what we do, and respond to industry opportunities and challenges. As we drive our business forward, it is pleasing to hear confirmation of our strengths and achievements from third parties.”
Through various national “cash for clunkers” programs, older, higher lubricant consuming cars were replaced by new often down-sized models with both smaller crankcase capacities, longer oil drain intervals, and growing OEM recommendations for synthetic engine oil, resulting in a decrease in lubricant volume demand, compensated by an increase in lubricant quality and higher revenues.
Group I base stocks** are continuing their long-term decline primarily due to technical obsolescence for automotive applications. The impending scarcity of Group I provides opportunity for other products like naphthenics in metalworking fluids, process oils, and rubber oils and is abetted by a supply push from Group II suppliers. George Morvey, Kline’s Energy Practice project-manager, cautions, “While Group II penetration into automotive formulations is happening relatively quickly given the sector’s fewer product variations, penetration into industrial applications is likely to be slower as there are many more product categories with small individual volumes; so the payback period for converting an application to Group II is longer.”
Strong pre-recession basestock prices have rendered re-refining a more compelling economic argument and combined with new regulations in Europe and increasingly in North America, the use of re-refined basestocks is encouraged. However, logistic issues and a lack of consumer conviction remain obstacles to their greater acceptance. Globally, supply of re-refined basestocks is projected to grow at over six per cent per year to exceed three million tonnes by 2021.
Kline’s Global Lubricants: Market Analysis and Assessment combines regional market analyses — including Canada — into a comprehensive program to provide finished lubricant formulators, additive and basestock suppliers, and end users with the latest information on products, services, applications, and trends in the leading lubricant consuming regions of the world.
**Group I base stocks contain less than 90 percent saturates and/or greater than 0.03-per-cent sulfur and have viscosity index greater than or equal to 80 and less than 120. Group II base stocks contain greater than or equal to 90 percent saturates and less than or equal to 0.03-per-cent sulfur and have viscosity index greater than or equal to 80 and less than 120.