Circular economy to drive re-refining, but challenges galore for re-refiners
Kunal Mahajan, Project Manager Chemicals & Energy, Kline
The interest of regulators and lubricant marketers in the used oil industry is growing as governments and companies worldwide are focusing more on circular economy. In this article, we will discuss the value chain, drivers and restraints, and outlook for the used oil industry.
Value chain:
The used oil industry value chain has three parts: Generation, collection, and disposal. (Note: There is a grey market for collection and disposal, which makes it difficult to get accurate data). 1 Globally, the generation rate is 50%–60%. However, exceptions are Canada with a generation rate of more than 65%—due to a relatively higher share of automotive lubricants—and Japan and India with generation rates of less than 50%, because of relatively higher shares of industrial lubricants.
2 Globally, used oil collection is 60%–70%, with exceptions such as Canada, China, and Western Europe, where regulations implementation is stringent and good collection infrastructure exists. Russia has a 50% collection rate due to logistics challenges.
3 Used oil is generally disposed of as fuel or is re-refined into base stocks; these applications collectively account for the disposal of more than 90% of the total volume of the used oil collected. Used oil is also disposed of in landfills, used as dust suppressants, or sometimes illegally released into the environment...
• Used oil re-refining depends upon the re-refining capacity and supply of used oil to re-refiners. Re-refining is the leading method of disposal in Brazil, the U.S., Canada, Western Europe, and China. However, used oil is not re-refined in South Korea and Thailand due to the absence of re-refining capacity. It is disposed of as fuel in Thailand and South Korea.
• India has a large used oil processing and re-refining capacity; however, supply to re-refineries is low as other disposal methods such as fuel are more profitable.
Drivers and restraints: Disposal of used oil, especially re-refining into base stocks, poses many challenges to the industry. These include the reliability of supply, low acceptance of re-refined base stocks, and lack of re-refining capacity. However, the industry is working to solve these challenges.
Demand for lubricants—especially automotive lubricants, which account for more than 70% of used oil generation volume—is expected to decline from 2030 onwards as the share of electric vehicles in the overall vehicle parc grows in many markets. This is expected to reduce the volume of used oil generated. However, this does not necessarily mean a decline in the supply of used oil to re-refineries. Used oil disposed of as fuel is expected to be diverted to re-refineries to meet government mandates for
Continued on page 23 LUBE MAGAZINE NO.172 DECEMBER 2022 21
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