Global PCMO consumption and growth will recover from the recession more rapidly than other automotive oils and should return to a pre-recession scenario in the next 12 months or so. HDMO will show slower recovery and will track the overall economic recovery. Other automotive will be depressed for the next 4 or 5 years. General industrial oils will recover moderately fast while MWFs will be the longest to recover due to the automotive industry slowdown. T his was just one of the key findings and conclusions by Kline and Company in their study Competitive Intelligence for the Global Lubricant Industry 2008-2018.
Last Tuesday Geeta Agashe, VP Kline and Co.’s Energy Practice presented a review of the global lubricant market and highlights of the study. The primary topics were Impact of the Recession, Performance Level Evolution, Lubricant Supply Chain, Geographic Disparities, and Competition.
The study found that global lube demand in 2008 was 38.2 million tons, of which the Asia-Pacific region accounted for 35% of that. North America was 26%, Europe 18%, Latin America 7%, Africa/Middle East 3%, and ROW (rest of world) 11%. Of the Asia 35%, China accounted for 14%, Russia 5%, Japan 4.5%, and India 2.9%.
The lubricant classifications presented in the study are broken down into Commercial Automotive which accounts for 29% of the overall consumption, Consumer Automotive 25%, General Industrial Oils 16%, Process Oils 12%, Other Industrial Oils 5%, MWFs 6%, and Industrial Engine Oils at 7%. General Industrial Oils include hydraulic, gear, turbine, compressor, etc. Other Industrial Oils include grease, way oils, rope oils, textile oils, etc.
As far as market share by company worldwide, Shell has maintained its leadership position on an overall volume basis and has gained market share. The Global "majors" have an approximate market share as follows: Shell, 13%; ExxonMobil, 11%; BP, 8%.
Agashe went on to say that global "mega majors" which include Shell, ExxonMobil and BP account for 32 percent of the overall lubricant market share. Regional majors including Chevron, Total, Fuchs, Idemitsu, ConocoPhillips, Valvoline, Petro-Canada and Petronas and makeup 20% of the overall lubricant market share. The remaining 48 percent includes that of NOCs and others which include Indian Oil, Lukoil, Petrobras, Sinopec, PetroChina, Agip and others.
Agashe stated that the study shows an expected market decline of 9% from 2007 to 2009.
Regarding the expected recovery, Agashe stated that PCMOs will recover more rapidly. Vehicle population growth in Asia continues as before. Among the existing car park driving habits are influenced by the price of fuel which has come down from the highs of 2008. Hence, overall PCMO consumption and growth should return to a pre-recession scenario in the next 12 months or so.
Regarding HDMO the status of the trucking industry is tied to the overall recovery of each country economy. Mining and construction segments will be depressed until a general recovery of demand takes place. The agriculture segment was not impacted by the recession, hence consumption will proceed largely as before. Overall HDMO consumption will show slower recovery and will track the overall economic recovery.
In respect to Other Automotive Oils, they have a significant dependence on factory fill segment which is not expected to recover in the next four to five years. In the after market, oil change is largely discretionary subject to "push" by oil change service providers. In an environment of cost consciousness these sales may be postponed. In addition, many of these products are trending to being "fill for life". Hence the Other Automotive segment will be depressed for the next four to five years.
General industrial oils will recover moderately fast due to the recovery in Asia and other growth markets. MWFs will be the longest to recover given the dependence on the automotive manufacturing sector. Similarly consumption by manufacturers of capital goods (various plant and machinery) will also be low due to slow down in new products in turn due to lack of demand and project funding. Some categories such as corrosion preventives will see growth in demand as more manufactured products lie unsold as inventory and need corrosion protection.
In regard to Process oils, with the exception of rubber applications (which is depressed due to the tire industry) most segments including transformer oils and white oils weren’t affected. Hence consumption and growth will quickly return to the pre-recession scenario. Industrial engine oil consumption will show a slower recovery and will track the overall economic recovery. Marine, railroad, and aviation oils were significantly affected by the impact of recession on global trade and travel.
Group I base oils are exiting automotive formulations (process is completed in North America and continuing in other markets), and face a declining demand. Vulnerable Group I plants will rationalize (in North America and Europe). New plants, all Group II/III, are being built in anticipation of engine oil quality improvements. This will result in an increasing Group II/III base oils surplus and an increasing Group I deficit (in particular heavy neutrals and bright stock) and a substitution push by Group II/III into Group I base oils. The net result is that the market place will see significant rationalization in Group I supply and penetration by Group II/III.
Agashe spoke on the global market share of the additive suppliers with LZ, Infineum, Oronite, Afton, Chemtura, Ciba, RohMax, in that order, having the greatest market share. The lubricants additives industry includes two basic categories, which are component manufacturers and package manufacturers. The key success components for component suppliers include efficient production (worldscale plants, backward integration) and expertise in specific component technology areas. The key success factors for package suppliers include knowledge of complete technology chain, OEM requirements, specifications and testing; know-how on chemical components - procurement and formulation; and product development and application support.
Agashe then spoke about the significant geographic disparities existing in the quality of lubricants being consumed globally. The highest performance lubes, and lowest volumes, exists in countries such as Germany, South Korea, Denmark, Norway, Sweden, Finland. The m id tier includes countries such as US, Japan, Taiwan, UK, France, Italy, Canada, while the low performance, high volumes tier includes countries such as China, Russia, India, Brazil. In addition, volumetric growth will come from BRIC+K countries (Russia, Brazil, South Korea, China, India) and N-10 countries (Vietnam, Indonesia, Egypt, Mexico, Nigeria, Turkey, Philippines, Pakistan, Bangladesh and Iran).
Finally Agashe spoke on competition and M&A activity stating that the basis of competition has evolved to be on a value chain basis and is most intense between NMCs and local majors in most developing countries. Local minors will continue to be acquisition targets and MNCs making inroads into the mid-end market. Local majors will establish more comprehensive distribution networks.
For further information on this study, visit Competitive Intelligence for the Global Lubricant Industry 2008-2018.
