Kline’s recently completed study on the global finished lubricant basestock market covers all major lubricant basestock categories including Group I, II/II+, III/III+, Naphthenic, Polyalphaolefins (PAO), and other basestocks. Focus of the study is on Group I, II/II+, III/III+, and Naphthenic basestocks. The study provides a five- and ten- year outlook to the industry.

 

 

In his presentation, Kumar said global finished lubricant demand is estimated at just over 39 million tons in 2014. This lubricant demand results in about 36 million tons demand for lubricant basestocks with Group I accounting for approximately 50 percent of the total demand.

 

The increased use of higher quality lubricants in passenger car applications due to technical requirements will create greater demand for high quality basestocks while HDMO will continue to be predominantly Group II based. Two-wheelers, a key mode of transportation in markets such as China, India, Brazil, Indonesia, Thailand and other Asian markets, is also shifting towards four-stroke technology that require greater use of multigrade oils such as 10W-30.

 

Globally, Group III/III+ basestocks will enjoy the strongest demand growth; Group I basestocks will continue to decline said Kumar.

 

 

Kumar said that potential lubricant basestock supply* in 2014 is estimated at around 38.0 million tonnes. With a supply* of 38.0 million tonnes and demand-a of 34.7 million tonnes, the market appears to be in surplus, but in reality the situation is different the difference being non-lubricant demand which essentially accounts for the difference,

 

Going forward, new capacities are being added much faster than retirements (and demand growth). New capacity additions include:

- Group II/II+ - ExxonMobil, Petrobras, Tatneft, Rosneft, NIS, HILL, Paralube, CNOOC, Sinopec, Yanbu, Takreer;

- Group III/III+ - HollyFrontier, Slavneft, Tatneft, Rosneft, Total, Modrica, HILL, Takreer;

- Naphthenic -  NIS, CNOOC, North Asphalt

 

 

Group I market is balanced. Group II/III markets are in surplus causing Group II/III substitution in Group I applications. Similarly, North America and Europe are in surplus, and export to other regions. Middle East is fast becoming a key exporter of high quality base oils.

 

There are two key issues to consider in this new order characterized by pronounced basestocks supply/demand imbalances (1) Growing supply/demand imbalances in low and high viscosity stocks and (2) New capacity creation and closure of uneconomic assets will alter global trade flows, as well as influencing prices and profitability.

 

Lubricant quality requirements no longer directly shape basestock demand. With inter-Group price compression, viscosity is more valuable than other performance characteristics. Performance is no longer a sole predictor of basestock demand with multiple routes allowing for a competitive cost position. Group II suppliers will look to expand the range of applications by looking into blends (e.g. with naphthenic) to overcome the limitations. Shrinking Group I supply shifts formulations to Group II/III irrespective of technical needs.