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re-refining, such as Indian government mandates for state-owned oil marketing companies to use 25% of re-refined base stocks by 2023. The European Union is also drafting a Waste Oil Directive to be passed in 2023, under which member states may be mandated to recycle 60%–80% of their lubricants consumption. Re-refining is also expected to grow significantly in China due to the improved quality of used oil and higher profit margins for re-refined base stocks than those of industrial fuels.
Poor implementation of regulations in markets such as Russia and India lead to illegal disposal of used oil, which further reduces the used oil supply to re-refiners. In these countries, share of re-refining is around 15%.
The quality of used oil supplied depends upon the collection practices in a market. For example, in some markets, collectors mix different types of used oil collected, leading to a poor quality that is unfit for re-refining. As a result, re-refiners collect used oil themselves. Avista and Safety-Kleen are among the biggest re-refiners that collect used oil.
The lubricants industry is shifting toward better-quality base stocks such as Group II and III base stocks. As the share of these base stocks increase, the quality of used oil generated will also improve, which is positive for re-refining.
The other key challenge is the lack of sufficient re-refining capacity. Even in markets with large re-refining capacity, such as the U.S. and Europe, a significant portion of used oil is disposed of as fuel as the existing re-refining capacity is not sufficient. The global re-refining capacity is also geared toward Group I base stocks and will continue through the near term. Group I re-refiners will face increased competition for a smaller market as the closure of refineries producing virgin Group I base stocks will not necessarily sync with the decline in Group I base stocks demand. However, this is an opportunity for re-refiners to produce Group II and III base stocks and increase their market share. Re-refiners such as Puraglobe are already producing Group II and III base stocks.
Lastly, consumers perceive re-refined lubricants to be of lower quality. However, a change in consumer perception is also expected to drive the demand for
re-refined base stocks. Lubricant marketers also value re-refined base stocks due to their potential to reduce carbon footprint of their operations, which is gaining importance. Over the years, re-refined lubricants have seen significant activity by lubricant marketers.
Lubricant marketers activity in used oil industry
• ReGen III Corp. signed an offtake agreement with bp, wherein bp will purchase ReGen’s entire RRBO production.
• In 2019, Total launched the ECO2 range of lubricants made from RRBO GEMS. Petromin and Aramco have signed an MoU to explore the production of re-refined Group II base stocks.
• Shell announced a partnership with IFP Petro for used oil collection in India from Shell customers.
• SK Lubricants and South Korea’s Ministry of Trade, Industry and Energy sign a multilateral business agreement to collect and recycle used oil and sell re-refined base oils as a low-carbon product.
• SKF and Quaker Houghton entered a collaboration to deliver circular use of oil.
Conclusion: The share of re-refining in used oil disposal is expected to grow more than 5% during 2021–2030. However, the corresponding jump in re-refining capacity is not expected as the sharpest increase in re-refining will come from Asia, where the utilisation of re-refineries is currently low.
The industry will continue to face challenges such as grey/black markets, perception of re-refined base stocks being of poor quality, and improper collection practices. However, the situation is improving with improved regulation enforcement, consumer awareness, and re-refiners’ collection network, which will positively impact the used oil industry.
www.klinegroup.com
LUBE MAGAZINE NO.172 DECEMBER 2022
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