An accelerating economy has doubled the passenger car fleet in Brazil to about 30 million vehicles since 2000 and, as a result, has also driven significant increase in demand for lubricants in the country. These trends have combined to propel Brazil to the sixth largest lubricants market globally, after China, the U.S., India, Japan and Russia, but ahead of Germany, says a new report from research firm IHS.

During 2004 to 2012, Brazil’s consumption of finished lubricants grew by 33 percent to reach 1.23 million metric tons (MMT) of products in 2012, according to the new IHS Chemical special market research report. According to IHS, the total global market for lubricants was approximately 39 MMT in 2012.

The report, the IHS Chemical Special Report: Market Study, Lubricants in Brazil, provides an in-depth analysis of the Brazilian lubricants market, including supply and demand, suppliers and producers, but also regulatory insights and market assessments for recycling and re-refining of used oils and the industry’s need for technological modernization in the country to meet the requirements of increasing regulation, which includes higher recycling targets. The potential growth of the market is analyzed in different scenarios, which give ideas about the market size in 2020.

According to IHS, nearly 70 percent of all lubricants used in Brazil are for automotive applications such as motor oils; diesel, gasoline and flex fuels; greases; powertrain fluids for transmissions and axles; and motorcycle fluids. Other uses include industrial lubricants for process, marine and specialty applications (aerospace, electronics, fine mechanics, vacuum technologies and high-temperature). Globally, automotive applications account for 56 percent of lubricants used, says IHS.

“Brazil’s increase in demand for lubricants is a direct reflection of its economic growth,” said Stefan Mueller, Ph.D., author of the study and a specialty chemical analyst at IHS. “The country’s GDP tripled during 2004 to 2011, and with that impressive growth, the disposable income of the population grew rapidly, allowing many families to buy their first car. This rise in economic activity propelled the lubricants market to new heights in Brazil, since automotive applications constitute a majority of lubricant uses in the country.”

According to the IHS report, which includes insights from IHS Automotive, there is ample room for growth in automotive demand in Brazil, which will continue to expand the need for lubricants. “The Brazilian automotive market continues to be driven by formal employment creation, improved financing rates that are at an all-time low, and a low unemployment rate,” said Guido Vildozo, Brazilian automotive analyst for IHS Automotive. “This powerful combination, which enables consumers’ access to credit, will continue to drive Brazilian automotive demand for years to come.”

Said Vildozo, Brazil also has a low motorization rate of a little more than five people per car, which allows for ample market growth. “More auto brands also are available, which also results in lower prices. The conditions are right for more Brazilians to become new car buyers. IHS expects the Brazilian auto market to be close to 5 million units before the end of this decade. Our outlook puts Brazil’s motorization rate at roughly 4.0 people per car in a five-year period, and 3.3 to 3.5 people per car during the next 10 years. This explains why Brazil has become such a critical pillar of growth for original equipment manufacturers (OEMs) worldwide, and the same can be said for producers of lubricants that supply the automotive sector.”

While the Brazilian lubricant industry has changed significantly for the better in terms of quality and quantity of its products, Mueller said the industry faces some significant technological and regulatory challenges that it must address in a short period of time or growth could be hampered. “From a quality perspective, the lubricants market will change greatly before 2020. New regulations are coming that demand less air pollution as well a decrease in fuel consumption for motor vehicles. These goals can be achieved only by introducing products based on higher-quality base oils, and new additive chemistry that has already been developed in North America and Europe.”

The challenge, Mueller added, will be for Brazilian market participants to decide whether to upgrade technology and invest in the required production plants or to import those products over time. With the trade balance for chemicals in an increasing deficit, he expects the government will likely “offer incentives to install the required plants and to encourage refiners to increase collection and re-refinement of used oils to help decrease the requirement for base oil imports.”

According to the IHS report, approximately 4,000 registered lubricant products are offered by more than 300 producers/distributors in Brazil. The nine largest producers are Petrobras, Ipiranga, Cosan, Chevron, Shell, Petronas, BP, Castrol, Total and YPF, and collectively, they produce 80 percent of the Brazilian lubricant market by volume.

Headquartered in Englewood, Colorado, IHS has been in business since 1959.