Besides a growing excess of capacity, the composition of the basestocks supply has also changed. The share of high performance basestocks has increased far in excess of the technical requirements of the finished lubricant market.
In the last five years, the share of Group II/III in overall supply has increased from 30% in 2008 to just under 50% in 2015. In 2014, Group III accounted for 13% of the supply – far in excess of technical demand. Adding to the existing surplus, the share of Group III is expected to rise to 16% by 2024 as more new capacity come on stream.
The excess supply of high performance basestocks has led to a collapse in their historical price premiums over Group I. As a result, blenders are increasing their use of premium stocks in applications where there is no technical need for their use. In contrast to the historical situation described above, today Group II and Group III basestocks are routinely used to blend industrial lubricants and mid-tier automotive lubricants with no technical requirement for these basestocks.
More power to independent blenders Besides a growing overall surplus and an excess of high performance basestocks, two other changes have occurred that strengthen the position of independent blenders. First, the number of merchant marketers of high performance Group II and III has grown significantly. For example, SK, SK-Repsol, Pertamina, Petronas, and Bapco Neste did not exist as merchant Group III marketers in 2004. S-Oil’s Group III capacity was a fraction of what it is today. Besides these large merchant Group III suppliers a number of companies including Lukoil, PKN Orlen, and Modrica in Europe and IOCL and HPCL in Asia have started Group III production in the last few years. More merchant suppliers dilutes the bargaining position of existing suppliers and improves the bargaining position of independent blenders.
Second, the variety of high performance basestocks on offer has grown. Besides the mainstream Group I, II, III, IV basestocks, the market now includes re-refined basestocks meeting Group II quality and basestocks made from renewable sources. Product innovations in the pipeline include: PAOs made from renewable sources, high viscosity Group III2
, and re-refined basestocks meeting Group III quality.
Group III basestocks may be produced in 8 cSt to 10 cSt range. While this is not high viscosity when other basestocks available in the market are considered, it is higher viscosity than currently being produced.
2
Blenders have responded to the changes in the global basestock supply by expanding product range and entering new market segments.
The easy availability high performance basestocks has helped drive a rapid increase in the consumption of synthetic and semi-synthetic lubricants. Synthetics are no longer the domain of just the major oil companies. This is because the high performance basestocks and additive technology required to produce these lubricants is available off-the- shelf. To establish and grow a synthetic lubricant business, blenders need to focus primarily on developing brand awareness, promotions, and alliances in first-fill, installed, and retail channels.
As a result, mid-tier companies, independents, national oil companies, retailers, distributors, and even automotive OEMs have started to market synthetic lubricants. Synthetic PCMOs are now available from a wide range of suppliers and in a wide price range.
For lubricant blenders and marketers the market situation appears to be rosy. Announcements in the last year seem to support this view. SK Lubricants a leading basestock marketer scrapped plans for an initial public offering (IPO). In contrast the parent companies of Gulf Oil and Valvoline, two independent lubricant marketers, spun off their lubricant businesses into separate entities possibly in preparation for a listing.
However conditions that make the market attractive to lubricant blenders are also inviting new market participants. As the table below shows, the number of competitors in the lubricant industry is increasing. Automotive OEMs, distributors, and installers are promoting their own brands crowding the field. In particular, a worrying trend, from the point of view of traditional lubricant marketers, is the spread of free maintenance plans featuring free oil changes offered by mass market OEMs such as Chevrolet-Buick-GMC, Toyota, and Volkswagen. As a result of this,
Growing Field of Synthetic PCMO Brands
18
LUBE MAGAZINE NO.131 FEBRUARY 2016
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65
