Kline’s Global Basestock Series - the European Saga
With the global finished lubricant demand at 38.8 million metric tonnes in 2015, the global basesoil demand accounts for 36 million tonnes. The global lubricant demand reached pre-recession demand levels in 2013, but growth seems to have evaporated since then.
Out of the total baseoil demand, Group I still accounts for the largest share with demand at just under 50% of the total. Group II/II+ accounts for close to one-third of the global demand, and the balance is accounted for by naphthenic basestocks, Group III/ III+, Group IV, and other Group V basestocks.
Only about 3 million tonnes of basestocks are used to blend synthetic and semi-synthetic lubricants . API group III/III+ basestocks (including GTL) cover the lion’s share of the demand, followed distantly by PAO, synthetic esters, PAGs, and other basestocks, such as PIB, phosphate esters, and alkylated aromatics, among others.
products. At an overall level, the market is short of high viscosity basestocks. This is due to the fact that as Group I supply is substituted by Group II and Group III, the supply of high viscosity basestock reduces. Group III plants do not produce high viscosity basestocks, and the share of high viscosity basestocks produced by Group II plants is lower than the typical production of Group I plants.
The global basestocks supply and demand will converge provided vulnerable Group I/ II basestock plants shut down and if some of the announced capacity additions are postponed, cancelled, or scaled down. There is limited demand growth potential, and demand may remain flat or contract. While this will help balance overall supply and demand, the imbalance for light viscosity basestocks (which are in surplus) and for high viscosity basestocks (which are in deficit) will continue.
In contrast to the global situation, in Europe, the supply-demand balance of Group II/II+ and Group III/III+ basestocks report a deficit, whereas API Group I posts a large surplus. Europe exports significant quantities of Group I basestocks to North Africa and South Asia. In turn, the region imports Group III from Asia and Group II from North America. Due to the scarcity of Group II in the region, formulations have used a Group I + Group III to blend mid-tier products.
However, this will rapidly changing since about one-third of the new global basestock capacity will come up in Europe. Based on official company announcements, some 2.1 million tonnes of basestock capacity is planned to come online over the next 10 years. Future base oil capacity additions are exclusively API Groups II/III and a naphthenic stream. Eventually, not all announced capacity may come online for a variety of reasons, ranging from cost position, the nature of ownership, to sustainable demand and returns on investments.
Over the last five years, composition of the global basestock supply has changed. The share of API Group II/III supply has increased from 30% to just under 50% in 2015, highlighting producers’ willingness to expand in the area of premium basestock as soon as possible. In addition, PAO capacity continues to increase; from 2011 to 2014, the global PAO capacity surged by 20%. Recently, INEOS Oligomers announced a new 20 kilotonnes high viscosity PAO unit at its La Porte plant in Texas, to be commissioned in the first quarter of 2017. In addition, the company plans to build the world’s largest low viscosity PAO plant (120 kilotonnes), which is expected to be on-stream in 2019.
The global basestock supply-demand balance highlights a surplus of API Group II/II+ and API Group III/III+, which currently substitutes API Group I from some overlapping applications – typically mid-tier automotive products and some industrial
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LUBE MAGAZINE NO.137 FEBRUARY 2017
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