Global finished lubricant demand is estimated at 39.2 million tons in 2013. This lubricant demand results in a 36.3 million ton demand for lubricant basestocks according to Klines 'Global Lubricant Basestocks: Market Analysis and Opportunities'. Potential lubricant basestock supply in 2013 is estimated at around 38.2 million tons, said Anuj Kumar, project manager in the Energy Practice at Kline & Company during a web presentation on October 8.
The study covers all major lubricant basestock categories including Group I, II, II+, III, Gas-to-liquid (GTL), Naphthenic, Polyalfaolefins (PAO), and other basestocks. The focus of the study is on Group I, II, II+, III, GTL, and Naphthenic basestocks
According to Kline, although Group I basestocks still enjoy slightly over 50% of the total global market, Group III and Group III+ basestocks will enjoy the strongest demand growth; while Group I basestocks will continue to decline.
With a supply of 38.2 million tons and demand of 35.1 million tons, the global base oil market appears to be in surplus. Barring inventory changes, supply should match demand/consumption, but in reality the situation is different due to several reasons. First, supply and demand estimates are developed independently, there is no plug figure, thus some difference is to be expected. Also, supply may be overstated, as it is based on the average production rate at the time of survey applied for the full year. Actual production may be lower due to unplanned outages, changes in feedstock and final product slate. In addition, the very light ends from some plants are not suitable for the lubricants industry, but are counted in the supply, while demand estimates do not capture consumption outside the lubricants industry: for example brake fluids, cleaners, solvents, carrier fluids, and manufacturing process oils are some examples. In some markets like Turkey, surplus basestock production is also used as fuel, the study found.
About 6.5 million tons of new Group II/II+ capacity is expected to be added and about 2.5 million tons of Group III/III+ capacity is planned over next ten years.
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.
In conclusion, Kline believes that the basestock industry needs to be thinking of a future very different from the past. Demand growth drivers are changing; strong growth is not a given. Slower than historical demand growth combined with rapid capacity addition will depress medium-term capacity utilization. Accelerated closure of high-cost plants is almost inevitable: Group I is the obvious target, but naphthenics and smaller Group II plants are also at risk. As overcapacity has essentially destroyed inter-Group quality premium, substantial reformulation of traditional Group I technical demand will continue for low and medium viscosity grades. Radical revamping of remaining Group I capacity may occur, to maximize production of heavy neutrals and brightstocks. The market will remain in surplus and the new capacities across the world will have an impact on the trade flows. The Middle East region will cement its position as a supplier of high quality basestocks.
