Continued from page 25
The presence of Russian material has been a bit of a game changer, with material priced extremely competitively and exerting pressure on unapproved prices. Even if some of this product is not the correct specification for some European players, the swell of product in the market alone has put pressure on unapproved values. This has brought about a situation whereby the spread between approved and unapproved Group III product has increased significantly.
With growing Group II and Group III capacities coming on line in the long term, some sources expect to see further Group I base oil capacity rationalisation in the coming years.
In Europe there tends to be more demand for high quality oils both because of advances in technology and also due to legislation which is demanding the creation of lighter and higher specification lubricants in order to reduce emissions. By making car energy more efficient partly through the use of higher quality lubricants, emissions can be reduced.
With the market shifting towards greater efficiency due to legislation like the Euro 6 emission standards, lubricant demand growth could be impacted as engines are moving towards longer drain intervals.
With Group I base oil production expected to decrease on a global scale in the long term, the likelihood is that brightstock and paraffin wax availability will tighten.
Some believe brightstock and paraffin wax could become niche products, with refiners potentially looking to maximise production of these products as market demand shifts to higher number base stocks. This scenario could ensure that an element of Group I capacity survives despite this shift and that any further Group I capacity rationalisation will be gradual.
When speaking to the market these days, players are not so sure that there are any real viable alternatives to brightstock in the market.
It is evident when speaking to the market though that there is a growing focus on the use of additives and synthetics to create something close to brightstock. There is also suggestion that some naphthenic base oils can produce something similar.
26 LUBE MAGAZINE NO.143 FEBRUARY 2018
At the moment technical limitations and the high costs involved in some of the above mean that the industry is not quite at a point where there is an alternative to brightstock which is widely in use by the industry.
Although certain brightstock substitution options may cost money now, with Group I capacity shrinking, the market could reach a point where brightstock prices increase to levels of parity with such methods. However, market sources have stressed that this is not a scenario they see happening in the near future and definitely not in 2018.
In conclusion, it seems that the impact of Group I capacity closures seen a few years ago are now hard to ignore, with room for further rationalisation in the long term as players opt for oils with greater efficiency. However, brightstock and paraffin wax could become niche products as a result of the shift and this may prompt greater focus on their production and also investment in substitutes for these products.
LINK
www.icis.com
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