LOCAL REPORT Brazil Paul Stephenson, OATS Ltd

With a 212m population and land mass of more than 20m square km, Brazil is South America’s largest country. It also consumes almost 50% of the region’s lubricants market.

After a devastating recession in 2015/16, the nation showed signs of recovery until the beginning of 2019. A stalled domestic economy, combined with a fall in exports (particularly to Argentina), has again seen Brazil’s GDP struggle, with 2019 growth predicted at 1.8%.

The vehicle parc and manufacturing This economic weakness does not appear to have affected vehicle production, sales and exports, however. Overall growth reached 5.3%, January to May 2019, equating to 1.24m vehicles.

Last year, cars and light commercials production totalled some 2.75m – averaging 240,000 units monthly – with heavy-duty trucks, buses and off-highway equipment adding 200,000 annual units. Brazil retains manufacturing presence from all major OEMs, despite Ford’s announcement in February 2019 to close its São Bernardo do Campo plant after more than 50 years.

Passenger and light commercial vehicle sales are topped by GM, through its Chevrolet brand, VW and Fiat Chrysler (FCA). In the heavy-duty sector, Mercedes-Benz remains ahead of MAN and Scania.

The fuel and lubricants sector

The overall lubricants market volume in 2018 was a fraction under 1.2m cubic metres, a 1.9% increase year-on-year. Of the six Brazilian states, São Paulo is by far the largest lubes consumer at 28%. Many of the oil majors have aligned themselves with regional operators and macro distributors. However, overall brand share has remained largely stable. Iconic, now representing Chevron and Ipiranga, takes a 21.3% share, almost one percent ahead of state-owned Petrobras, with Cosan/Mobil taking around 14%.

After the 1973 fuel crisis, flex-fuel (ethanol-blended gasoline) became mandatory and still powers 87.6% of Brazil’s engines, with diesel at 8.9% and pure gasoline at just 3.3%. Even modern flex-fuel engines


present challenges for lubricants: fuel dilution, lower viscosity, increased acidity and emulsions formation. However, overall engine improvements have influenced lubricant demand patterns. From 2003 until 2010, 5W-40 engine oils dominated market share at around 36%-49%, with 5W-30 making up the majority of the rest. From 2010 the balance shifted, with the 5W-30 share increasing to above 43% and a new market for high-performance 0W-20 lubes. Now, API SM, SN, SN plus and ILSAC GF-5 specifications are rapidly gaining against OEM own-specs.

In the heavy-duty diesel market, API CI-4/ACEA E7 engine oils moved to recommended low ash fluids such as API CJ-4 following the implementation of Euro V/PRECONVE P-7 emission standards from 2012. With PRECONVE P-8/Euro VI set to be implemented in Brazil from 1 January 2022 and for new sales and registrations from 1 January 2023, the country is already ahead of the regional curve in building compliant HD engines.

Base oil

Although 1.4m cubic meters of base oil was produced in 2018, imports were still at a 42% record high. Petrobras contributed the majority of Brazil’s output, with only local producer, re-refiner Lwart Lubrificantes, currently providing any significant Group II volume.

In summary While Group I base oil formulations remain dominant, the challenge for Brazil’s refiners and lubes producers is to meet the trend – already well-documented in fully-developed markets - for higher-quality lubes products influenced by improved engine technology and stricter emission standards.

Ethanol has the potential to halve greenhouse gas emissions compared to gasoline and is expected to remain an important bio-fuel industry in Brazil and enhance energy independence. However, its overall impact across the complete life cycle needs greater investigation.


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