Impact of COVID-19 on Oil and Lubricants market

The Impact of the COVID-19 Pandemic on the Global Lubricants Industry

The Impact of the COVID-19 Pandemic on the Global Lubricants Industry 

By Ian Moncrieff and Milind Phadke 

 

Key Takeaways 

  1. COVID-19 could last from six to 18 months worldwide
  2. Economic impacts are already severe, and evolving national policies will impact the shape and duration of economic recovery
  3. Oil markets are in free fall, with transportation fuels hit hardest
  4. Based on our analysis of the market situation at time of writing this article, 2020 lubricants consumption could drop by at least 15%, and perhaps even up to 30%, from 2019 levels with PCMO most impacted
  5. Adverse lubricants market signals could extend beyond 2020 if COVID-19 persists or social distancing becomes embedded in corporate behaviors

Impact of COVID-19 on Oil and Lubricants market

How Did We Get Here? 

The COVID-19 pandemic, which started in China in November 2019, now afflicts much of the world. What will be its immediate and lasting impacts on the global economy and, specifically, on the lubricants industry? In a series of articles over the next weeks, Kline will analyze the impacts of this pandemic on various dimensions of the global lubricants, base oils, and additives industries. 

The story of the spread of SARS-CoV-2, the virus that causes COVID-19, has been widely told and does not need repeating here. What is now clear is that the virus is highly transmissible and has a higher mortality rate than seasonal influenza. There are currently no medicines or vaccines to fight the disease. The only effective weapon at present is social distancing, imposed by various means, to slow transmission of the disease. 

At best, it would seem that radical measures adopted worldwide could contain the impact of COVID-19 to mid-year (a lifecycle of a little over six months). Just as likely, based on the history of previoupandemics such as the Spanish flu and Swine flu, its extent could persist for up to 18 months, lasting into 2021. 

The Economic Consequences 

COVID-19, and the restrictions put in place to inhibit its spread, will have massive and potentially long-lasting consequences. Governments are responding with measures to stimulate economies, assure liquidity, and soften impacts on the...

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wax industry

Strengthening Sustainability Efforts Move the Goalposts in The Wax Industry

Strengthening Sustainability Efforts Move the Goalposts in the Wax Industry

By Pooja Sharma, Project Manager, September 2021

The economic and health crises of 2020 have caused energy market participants to refocus their attention on protecting the global ecosystem and regeneration — and now, the global wax industry is doing its part to move toward cleaner, sustainable, and circular products.  

As the volume of petroleum wax continues to diminish, crude oil-derived petroleum waxes and non-petroleum synthetic and natural waxes are stepping up to fill supply gaps in the wax industry. But how well will these waxes align with the drive toward global sustainability? Are there more sustainable substitutes? And are consumer preferences changing in favor of end-products with low carbon footprints and recyclable? 

Petroleum wax, which is the workhorse for the wax industry, is produced as a byproduct of Group I base oil production as well as via solvent dewaxing of heavy waxy crude. The supply of Group I base oil-derived wax, which is associated with Group I base oil production, is declining due to declining demand for Group I base oils. The demand for Group I base oils is declining as the automotive and industrial lubricant applications transition toward more efficient lubricants formulated from higher-quality base oils. It is estimated that in the next 10-year period, base oil supply by wax-producing Group I plants will reduce to half of its current volume and, in the long-term — by perhaps 2050 — the supply will further reduce to nearly one-third of the current volume. This will have drastic implications on the supply of petroleum waxes, leaving the world short of nearly 1.5-2.0 million tonnes of gross Group I base oil-associated slack wax production. 

Wax and Group I Base Oil Supply Trend

Crude oil-derived petroleum waxes, produced by massive petrochemical refineries in Northeast China, have historically helped in softening the blow of Group I base oil-derived petroleum waxes capacity closures. These refineries will continue to supply petroleum waxes in the mid- to long-term future to partially fill the gap created by the loss of base oil-derived waxes. 

But which waxes are most sustainable? According to Kline's research, those produced via synthetic and natural processes may have an edge in the long-term future. Synthetic waxes that are derived from natural gas, such as those produced via Fischer-Tropsch (FT) process and polymerization of ethylene, have relatively lower carbon footprints compared to crude oil or coal-derived waxes.  These waxes are also free from toxic impurities such as polycyclic aromatic hydrocarbons, sulfur, and heavy metals, which may be found in petroleum waxes.  

Polyethylene (PE) waxes currently upstage other synthetic waxes when it comes to offering innovative sustainable products. Byproduct PE waxes that are produced via thermal cracking of waste plastics replace the “end-of-life” concept with “regeneration” in the plastics industry — one of the most vexed industries for waste generation. Although thermal cracking of waste plastics into oils and waxes has existed for years, the technology is regaining focus as a viable solution for tackling global waste plastics issues. New players are entering this market, with GreenMantra and Clariter being the most recently established.  

waste plastics into oils and waxes

The wax market is also currently seeing the introduction of revolutionary bio-based PE waxes. This type of wax, produced from plant-sourced ethanol, a 100% renewable source, can assist end users in reduce their carbon footprints when used in applications such as adhesives, cosmetics, coatings, and PCV compounding. In June 2021, Braskem, a Brazilian petrochemical company, introduced a sugarcane ethanol-based bio-PE wax product to its I'm green™ branded product portfolio. Demand for such products in the future will be driven by PVC manufacturers who are introducing bio-based PVC products to their portfolios and are looking for bio-based solutions for PVC lubrication. Bio-based PVC technology has recently surfaced, with eminent PVC manufacturer INEOS’ INOVYN business at the forefront with its BIOVYN branded bio-PVC products. 

Natural waxes that are produced from renewable plant-based sources and carry a green label on them, such as palm and soy, are doing exceptionally well in candle applications. These waxes are also gaining steam in cosmetics, food-based packaging, and coatings applications, driven by their suitability for food contact. Natural waxes have historically advanced only in application areas that consume softer waxes due to their lower melting points. However, the growing desire of wax consumers to use sustainable ingredients in other applications that have been traditionally served by harder, high melt-point waxes will drive their demand in the long term. Clariant’s Licocare rice bran wax, which is targeted at high-melt applications such as engineering thermoplastics and masterbatches, is an example of this trend. 

How will the wax industry acclimate to the new sustainable and circular environment? What roadblocks could slow down the adoption of waxes with low-carbon footprints?

The wax market has historically exhibited versatility and adeptness in absorbing non-petroleum waxes in the absence of a sufficient supply of petroleum wax. In the future, it is estimated that wax customers in traditional candles or board sizing applications — who are sensitive to changes in supply or price of wax — will experience a more significant impact. These applications will find it tougher to transition toward more expensive alternatives to petroleum wax, such as FT waxes. These applications are driven by end-consumer preference, have low barriers to entry, and are vulnerable to substitution in the long run. In contrast, rheological and surface applications such as PVC, hot-melt adhesives, masterbatches, inks, paints, and coating are higher-value applications that offer higher barriers to entry. Rheological and surface applications also have the ability to pay higher prices for waxes. In the long run, these applications will exhibit higher flexibility to absorb cleaner or sustainable products, such as synthetic waxes or even chemically modified plant-sourced waxes, which are typically more expensive. 

Another foreseeable challenge in transitioning toward clean and sustainable waxes could arise due to the raw material limitations for these waxes. Both synthetic and plant-sourced natural waxes could see supply limitations in the long-term future for several reasons. For one, in FT waxes, nearly half of the global supply is met by Chinese coal-to-liquids (CTL) plants, which convert coal to syn gas for producing waxes and other products. These plants are not likely to see any capacity additions beyond 2030 as China tightens its carbon emission limits to meet its carbon neutrality targets by 2060. Other synthetic wax suppliers, such as thermal degradation PE producers, may see lower volumetric growth due to raw material issues. The raw materials (plastic waste) that these plants consume are non-uniform in nature, resulting in lower quality of finished products. While these waxes may be able to meet the circular economy objective, they may not achieve the required quality standards for several applications. 

Vegetable oil-derived waxes may seem to be checking all the boxes, as they are plant-sourced. However, they will also have their own limitations in the future. Growth in palm plantations, from which palm wax is derived, has been termed as “the other oil spill,” as it has resulted in large-scale deforestation of tropical forest land in Asia. Negative consumer sentiments associated with palm plantations are likely to hamper the growth in palm waxes in the future. Meanwhile, soy waxes —produced from soy oil — are seeing growing demand from other competing markets such as fuels and food, and this could restrict the availability of soy oil for producing wax. 

wax industry acclimate to the new sustainable and circular environment

Sustainability trends will provide a new spin to the wax market 

The ever-complex wax market will face new challenges as consumers increasingly demand materials produced from greener sources. As a result of such demand, suppliers will strive to exhibit their commitment to protecting the global ecosystem by including new, innovative products based on renewable and recycled sources. With a reinforced global wave toward sustainability and a circular economy in 2020 and 2021, the wax industry is at the cusp of a new — and sustainable — normal.  

Kline & Company, an industry leader in providing market research reports and expertise on the wax industry, will soon be publishing a detailed report titled, Global Wax Industry: Market Analysis and Opportunities. 

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Global White Oils: Market Analysis and Opportunities

The global demand for white oils has been increasing slowly over the past few years. Despite the slow growth, the market remains dynamic due to the increasing use of Group II baseoils, intensifying competition from small suppliers, substitution by other products, and increasing regulatory control.

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Global Lubricants: Market Analysis and Assessment

This continuous publication since 2003, provides a comprehensive, in-depth analysis of automotive and industrial finished lubricant products, end-use industries, trade classes, major suppliers, and market trends in leading country markets and regions.

The customized report covers your choice of 10 country market and/or supplier profiles and offers a comprehensive Year in Review summarizing the overall global lubricants industry.

Learn More >>

 

 

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Road to Recovery: Zooming in on the U.S. Professional Hair Care Market

Road to Recovery: Zooming in on the U.S. Professional Hair Care Market

The COVID-19 pandemic has transformed the hair care industry, amplifying many trends that were already present in the market. Download this highlights report to uncover key trends in: 

Channels: E-commerce became the main shopping destination consumers turned to during the temporary shutdowns of brick-and-mortar retailers. In the professional hair care market, e-commerce was the only channel to record growth, accelerating manufacturers’ move toward digitalization. 

Services: Color and treatment and corrective color remained among the fastest-growing salon services in the first quarter of 2021; their average service price surged as well. Do-it-yourself color experienced major growth while salons were closed, and this is expected to impact coloring services in the future. 

Products: With more consumers at home, the “skinification” of hair reached new heights. Consumers started to treat their scalp like the face, and various scrubs, masks, oils, and serums were introduced that effectively treat scalp concerns

weed resistance to herbicides

What Are the Latest Strategies to Mitigate Herbicide Weed Resistance?

What Are the Latest Strategies to Mitigate Herbicide Weed Resistance?

By Vera Sandarova, Kline

 

weed resistance to herbicidesA trio of technologies has emerged to counteract the herbicide resistance that wreaked havoc among crops and forced many farmers into bankruptcy.  

Since first being discovered in 1968, herbicide-resistant weeds have been reported in nearly 500 unique cases. Monsanto came to the rescue in 1996 via its introduction of genetically engineered Roundup Ready® (RR) crops, which increased crop yields, but eventually, 22 weeds worldwide became resistant to the glyphosate used in RR. Growers soon began employing PPO-inhibitors, but by 2015, PPO-resistant Palmer amaranth caused countless farmers to experience yield loss and struggle to control resistant weeds. 

To counteract herbicide resistance, the industry has been developing three technologies:
 

Stacked herbicide tolerance (GMO)  

To battle glyphosate-resistant weeds, agrochemical companies have been cultivating new herbicides or, more commonly, using genetic engineering to create herbicide-resistant crop plants. However, the cost of developing new active ingredients and the time required to develop them, along with the limited potential for economic return, have made it difficult to bring new products to market quickly. To fill the gap, companies chose to introduce 2,4-D and dicamba resistance to crops.  

There are two of these stacked herbicides technologies currently on the market: Xtend technology (Monsanto/Bayer)​ and Enlist Technology ( Dow/Corteva)​. Both have advantages and disadvantages, which are analyzed in detail in Kline’s Strategies to Mitigate Weed Resistance to Herbicides: U.S. Market Analysis and Opportunities study. Both technologies are creating multiple resistance capabilities, for which unique formulations will be required.   

Stacked gene seeds currently cover 70%-80% of planted acres of soybean and cotton and will likely increase to about 90%; there is a split between Enlist and Xtend technologies.  

New herbicide modes of action 

While no new modes of herbicide action had been developed in the past 30 years, some finally began emerging in 2020. Companies such as BASF, Bayer, FMC, and Mitsui announced new herbicides that have some novel modes of action; still, none of the new herbicides appear to be game changers in the short term. 

Perhaps the most interesting novel herbicide, tetflupyrolimet from FMC Corporation, was granted a new mode of action classification in the spring of 2021. FMC plans to start the registration process and launch products containing tetflupyrolimet in the transplanted and direct-seeded rice markets in 2023. The use of tetflupyrolimet is being tested in other crops, including sugarcane, wheat, soybeans, and corn. 

Herbicide combination products 

Since combination herbicides exploded in the 2000s, market share has grown to 37% of U.S. herbicide sales. Combinations contain between two and four different actives; new actives are often introduced in combination herbicides.  

Today, more than 300 different brands are sold in the U.S. market by all the majors, post-patent suppliers, and distributors. Syngenta is the sales leader followed by Corteva (which has the most combination brands). Distributors such as Loveland, Tenkoz, and Helena all sell different combination herbicides under private-label brands; even off-patent suppliers like Nufarm and Albaugh offer combination herbicides. According to our projections, Kline expects combination herbicides to grow at a rate of 6%, resulting in U.S. sales of $3.5 billion in 2025.  

To take a deep dive into analysis of all three strategies, consider Kline’s Strategies to Mitigate Weed Resistance to Herbicides: U.S. Market Analysis and Opportunities. To learn more about the study, visit our website. 

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Beauty Nutrition: Market Trends, Growth, and Innovation

Beauty Nutrition: Market Trends, Growth, and Innovation

Due to the ongoing COVID-19 pandemic, consumers have shifted to a new area of beauty that is concentrated on health and wellness. “Beauty from Within” — or hair, skin, and nail supplements — is growing at a rapid, double-digit pace.  

Wellness supplements that offer wide-ranging benefits, including better sleep, enhanced mental wellness and beauty, and relief from stress and anxiety are popular among consumers. Products with sustainable, vegan, organic, clean, and eco-friendly claims remain top of mind, and this is expected to continue in the following years as marketers center innovation around natural ingredients. 

The beauty nutrition market is comprised of a wide range of competitors, from supplement manufacturers to food, beverage, and beauty players, mushrooming into all retail outlets. What started in specialty stores like Ulta and Sephora has been mainstreamed into food/grocery stores, drugstores, mass merchandisers, and department stores. The e-commerce channel registered unprecedented sales gains due to the rising popularity of personalized nutrition offerings, coupled with strong promotion on social media. 

What are consumers’ favorite product forms? What ingredients are in high demand? What are the latest launches from leading brands like Nature’s Bounty and Olly, as well as emerging ones like SugarBearHair? How do retailers like Walmart, Walgreens, CVS Health, Target, Whole Foods, and Kroger respond to this rapidly growing segment?  

Get the pulse of the beauty nutrition market from our highlights report focusing on: 

  • Growth drivers and key trends 
  • Leading brands and private-label activity 
  • Hot ingredients and popular product forms 
  • Retail breakdown and future view of the segment 

The insights and data in this highlights report represent select excerpts from our in-depth Beauty Nutrition: U.S. Market Brief study, revealing key areas of growth in the “Beauty from Within” realm along with potential acquisition targets. 

white oils growth post covid

How Will the White Oils Market Evolve in the Post-COVID-19 World

How Will the White Oils Market Evolve in the Post-COVID-19 World

By Kunal Mahajan, Project Manager, July 2021

Global white oils demand is expected to grow at a CAGR of 3.1% to reach almost 2.0 million tonnes by 2025, mainly due to the global economy recovering from the impact of COVID-19.

White oils ― comprised of highly refined paraffinic or naphthenic baseoils with extremely low aromatic content ― are colorless, tasteless, odorless, and hydrophobic and do not change color over time. They’re also known as light mineral oils, light liquid paraffin, and light paraffin oils in different parts of the world.

White oils are used in various industries and their functionality varies from one industry to another. Key white oil applications are described in the table below:

white oils market in different applications

The Changes in White Oils Grades Uses

White oils are produced in two quality grades: pharmaceutical and technical (or industrial) grade. Pharmaceutical grade is the most refined white oil, consisting of only branched alkanes and cycloalkanes and free from aromatic or unsaturated compounds. Quality standards for pharmaceutical-grade white oils in a country are usually set by the national pharmacopeia. However, standards set by the United States Pharmacopeia and the U.S. FDA for use in the food, pharmaceuticals, and personal care industries are followed globally. 

Pharmaceutical-grade white oils are mainly used in industries such as personal care, pharmaceuticals, and food, as the end products of these industries are either ingested or come in contact with human skin. Earlier, pharmaceutical-grade white oils were used in equipment, where incidental contact with food, medicines, or personal care products was possible. For all other equipment, technical-grade white oils were used. However, lately, for all equipment, only pharmaceutical-grade white oils is used irrespective of whether the lubricant can come in contact with end products or not. This approach is followed in most markets.  Pharmaceutical-grade white oils are also used in industrial applications such as adhesives and sealants, and plastics, as they are used in packaging food, medicines, and personal care products. 

Technical-grade white oils are mainly used in non-food-contact industrial applications such as textile, plastics, and adhesives and sealants, paper, and agriculture. However, technical-grade white oils can be used in food, pharmaceutical, and personal care industries, where white oils do not come in contact with end products in some markets, such as China. 

Why Pharmaceutical Grades Dominate

Pharmaceutical-grade white oils lead demand with more than 50% share due to a preference for pharmaceutical-grade white oils in the food, pharmaceuticals, and personal care industries. They also have significant usage in the plastics and adhesives and sealants industries used for food, medicine, and personal care products packaging, as previously noted.

However, there are regional variations. For example, in Europe and North America, pharmaceutical-grade white oil dominates the market, with more than three-fourths of market share. As a result, in these regions, end users in industrial applications such as adhesives and sealants or plastics (not meant for food packaging) also use pharmaceutical-grade white oils.  The end users were already using pharmaceutical-grade white oils and have shifted to only using pharmaceutical-grade white oils. It also helps end users project an image of being more health- and safety-conscious. And while pharmaceutical-grade white oils are more expensive than technical-grade of white oils, the price difference is within the 5% to 10% range, which is not cost-prohibitive.

Global White Oil Demand

Global white oil demand was estimated at 1.7 million tonnes in 2020. Asia leads consumption, as it is the leading producer of plastics, textiles, pharmaceuticals, and adhesives and sealants (the industries that are the largest consumers of white oils). Asia is also one of the biggest producers of personal care products globally. China and India are the two biggest markets for white oils in Asia. Asia is followed by North America and Europe, with plastics and personal care being two leading consumers of white oils in both regions. The United States is the largest market in North America, accounting for almost 95% of white oils demand in the region. In Europe, Germany is the leading consumer of white oils.

 GLOBAL DEMAND OF WHITE OILS BY REGION, 2020

white oils demand by region

Impact of COVID-19

The COVID-19 pandemic had an adverse impact on global white oils demand, causing an estimated 5% drop in 2020. The scale of decline varied from one country to another. The decreases, between 5% and 10%, were higher in developed markets such as Germany, the United States, France, and the United Kingdom because these countries were among the most impacted during the first wave of COVID-19, experiencing temporary closures or reduction in production activities in various factories.

China and India also witnessed lessened demand of around 3% in 2020. However, in other Asian countries, such as South Korea, Japan, and Indonesia, drops in demand were not significant for several reasons. For one, decreased demand in industries such as agriculture, textile, and personal care in South Korea and Japan in 2020 was offset by increased demand in the food, pharmaceuticals, and plastics industries. As a result, the decline in demand was less than 1% in both South Korea and Japan. Other countries, such as Brazil and South Africa, also witnessed minor decline in white oils demand in 2020.

The impact of COVID-19 on various industries differed. As consumers observed quarantine orders and purchased less makeup and clothes, demand for white oils decreased in the personal care and textile industries. Meanwhile, the closure of restaurants and bars led to a decline in white oils demand in the food industry, and the temporary closure of plastics and adhesives and sealants production facilities also led to declines. But the pharmaceuticals industry saw an increase in white oils demand. The reason: Pharmaceuticals production rose, with consumers purchasing more than their average number of medications during the pandemic.

Base Oils

White oils are among the purest lubricants. Group I base oils need to undergo an extensive purification process before they can be used to produce white oils. This increases the cost of producing white oils from Group I base oils. Further, the supply of Group II base oils has increased while the supply of Group I base oils has decreased. As a result, white oil suppliers prefer Group II base oils over Group I due to the higher processing cost associated with the latter. Group II base oils are also preferred over Group III base oils, as the latter are more expensive than the former.

The choice of base oils to produce white oils also depends upon the availability. For example, the United States is the biggest producer of naphthenic base oils. Therefore, the usage of naphthenic base oils to produce white oils is higher than Group I and III base oils in the country. The demand for white oils in Indonesia and South Africa is met through imports; the base oils used to produce them depend upon their availability in countries such as India and South Korea, from where white oils are imported.

White Oil Suppliers

China, the United States, and India, together, accounted for around two-thirds of global white oils demand in 2020. Consequently, the leading white oils suppliers in these countries also lead the global market. For example, Sinopec leads the market in China and is the leading supplier globally. Similarly, HollyFrontier and Calumet, together, account for 90% of sales in the United States. Savita Oil, Gandhar Oil, Raj Petro, and Apar are top leading suppliers on India’s white oils market.

Apart from Indian white oil suppliers, most other white oil suppliers are focusing on their domestic markets. For example, Sinopec is the biggest white oil supplier, but all its white oil sales are in China; Indian suppliers such as Gandhar Oil and Savita Oil, export white oils to such countries as Brazil, Indonesia, and South Africa. Panama Petrochem, an Indian supplier, is mainly focusing on the exports market for white oils.

Where Will White Oils Grow the Most?

Lithium-ion battery separators is expected to be the fastest-growing application for white oils from 2020 to 2025, driven by increased interest in electric vehicles. The pharmaceuticals industry is expected to be the second fastest-growing application for white oils, driven by an aging population in Europe and countries such as Japan, as well as increasing healthcare coverage in countries such as India and South Africa.

Africa and the Middle East, and Europe are expected to be the fastest-growing regions for white oils demand globally. Europe was the region most affected by COVID-19 and is thus expected to have faster growth rates as its economy recovers. Growth in Africa is expected to be faster due to income growth, leading to quicker growth in packaged food items and pharmaceuticals. This, in turn, will lead to higher growth in white oils demand. Asia will remain the biggest white oils-consuming region due to economic growth and the continued shift of the industrial production of plastics, paper, and more to Asia.

In terms of grades, demand for pharmaceutical-grade white oils is expected to grow faster than technical-grade white oils. This will occur as white oils demand in the pharmaceuticals, food, and personal care industries — which mainly use pharmaceutical-grade white oils — grows faster than white oils demand in industries such as adhesives and sealants, along with plastics, which uses technical-grade white oils in large quantities.

In terms of base oils, demand for Group III and II base oils for manufacturing white oils is expected to grow faster than demand for Group I and naphthenic base oils. This is mainly due to purity requirements and growth in the supply of Group II and III base oils.

About the study:

Global White Oils: Market Analysis and Opportunities assists white oil marketers in identifying opportunities within the global white oil industry. It also serves as an invaluable tool in the strategic planning process. To learn more about the study REQUEST more information.

 

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RELATED STUDIES

Global White Oils: Market Analysis and Opportunities

The global demand for white oils has been increasing slowly over the past few years. Despite the slow growth, the market remains dynamic due to the increasing use of Group II baseoils, intensifying competition from small suppliers, substitution by other products, and increasing regulatory control.

Learn more >>

Global Lubricants: Market Analysis and Assessment

This continuous publication since 2003, provides a comprehensive, in-depth analysis of automotive and industrial finished lubricant products, end-use industries, trade classes, major suppliers, and market trends in leading country markets and regions.

The customized report covers your choice of 10 country market and/or supplier profiles and offers a comprehensive Year in Review summarizing the overall global lubricants industry.

Learn More >>

 

 

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Argentina lubricant demand growth

Five Reasons to be a Part of Argentina’s Lubricants Market

Five Reasons to be a Part of Argentina’s Lubricants Market

By Kline Energy Team, July 2021

Argentina lubricant demand growth

The finished lubricants market in Argentina is estimated to increase at a compound annual growth rate (CAGR) of 2.9% between 2020 and 2025 to reach 209.4 kilotonnes, according to Kline’s just-published analysis. What are the five key drivers of this impressive outlook? Where do the opportunities lie? Read on:  

 1. Growth of demand for finished lubricants in Argentina due to growth of e-commerce and delivery apps

Despite the pandemic, the motorcycle parc in Argentina grew by 3% in 2020. The growth in sales stems from the increased demand from e-commerce, delivery apps, and individual transportation. During the same year, 1.3 million new consumers in the country shopped via e-commerce, taking the overall user base to 20 million online shoppers. This generated delivery demand in Argentina for 164 million purchase orders for goods, an increase of 84% over 2019. According to the Global Ecommerce Update 2021, Argentina was the country where e-commerce grew the most in 2020. [1] In addition, according to consultant Focus Marketing, the use of delivery apps in the country grew by 400% from March to May 2020 due to isolation measures [2]. Finally, motorcycles were adopted by Argentines as an economic means of transportation during the pandemic. Without access to public transportation, the alternative of using a personal vehicle for a large part of the population was too expensive, as fuel prices increased 19% in the second half of the year, in addition to inflation of 36% in all other vehicle-associated expenses. 

Why is this an opportunity? Prior to the 2020 pandemic, e-commerce was used by less than 30% of the population in Argentina, and delivery apps were in their infancy. The lockdown drove the need for consumers to make purchases via e-commerce to obtain essential provisions. The adoption of e-commerce and delivery apps by consumers has consolidated even after the lifting of restrictions. Between 2021 and 2025, continued inflation and lack of access to public transportation will push more consumers in the country to purchase motorcycles and scooters as a low-cost solution for delivering e-commerce orders (as part of their jobs) or to move around the cities. These factors will drive demand for MCO in Argentina at a CAGR of 4.0% through 2025, by when re-pandemic activity will return due to extensive levels of vaccination. 

ESTIMATED DEMAND FOR AUTOMOTIVE ENGINE OIL IN ARGENTINA, 2020 -2025

Argentina Lubricant demand growth

2. Argentina’s lithium deposits

As the world turns to hybrid electric vehicles (HEV) and battery electric vehicles (BEV) to reduce CO2 emissions, Argentina has taken steps to profit from its rich lithium deposits. In August 2020, the Sustainable Mobility Law (MS) was introduced; it will facilitate an investment of USD 5 billion in the country for national production (offering tax incentives and accelerated amortization, among others, to manufacturers) to be scaled over the next 20 years. Numerous other themes are also included in the law, such as the Mobility Institute for motivating technological innovation in the vehicle industry, electro-chemical R&D (lithium), mobility R&D, and technology R&D (combustion cells, driverless vehicles, artificial intelligence, and 5G super connectivity). The law covers passenger vehicles, public transportation, and commercial vehicles. Over the next five years, the project plans to attract USD 300 million in investment, generate more than 2,000 jobs, and lead to local and international sales of USD 570 million annually.

While most lithium extraction projects in the country are in their initial phase, the Argentinian government is betting on this sector as a significant source of revenue in the coming years. President Alberto Fernández’s administration hopes to boost annual lithium carbonate production in Argentina to more than 230,000 tons by the end of 2022, a sharp rise from the current level of 40,000 tons. One of the incentives being analyzed to lure miners includes investment incentives for lithium mining, which may include a possible exemption for profit repatriation.

Why is this an opportunity? Argentina is a major source of lithium, the key component in EV batteries. According to the United States Geological Service (USGS) [3], the country has 19.3 million tons of lithium reserves. It has two projects (one on standby) that could generate 38,000 tons of lithium carbonate equivalent (LCE) intended for export. The Argentine Association of Mining Companies (CAEM) [4] expects lithium production in the country to double by 2022. As each of these projects comes to fruition, they will demand a variety of automotive and industrial lubricants for their operation.

3. High commodity prices benefitting sales of agricultural equipment in Argentina

The off-highway finished lubricants segment in Argentina includes vehicles and mobile equipment used in the agriculture, oil and gas, mining, and construction industries. The agricultural and manufacturing industries (mainly associated with food processing) were the largest consumers of industrial lubricants in the country in 2020, accounting for 18% and 17% of demand, respectively.

INDEC (Argentine Institute of Data and Census) reports that in 2020, sales of agriculture equipment units exceeded 2019 levels by 31.2%. Sales of sowing machines grew by 24.9%; tractor sales increased by 4.3%, while only harvesters suffered a minor decline of 2.1%. In 2020, the national production of tractors in Argentina posted growth of 82%. This equipment category is registering impressive growth after two prior years of recession and inflation. Many agricultural companies trade their grains with manufacturers to upgrade their equipment. It is also a way to protect their crops, which lose quality if stored too long in silo bags.

AW68 is the leading hydraulic fluid grade used specifically for its large load-carrying ability, reflecting the demand associated with heavy-duty equipment, including excavators, forklifts, cranes, combines, balers, and harvesters, as well as natural gas and air compressors.

Why is this an opportunity? In the off-highway segment, Argentina’s agriculture industry is implementing high-technology engines, especially in tractors and harvesters. These diesel engines require high-quality HDMO meeting the API CJ-4 and CK-4 service categories, both of which are compatible with Euro V standards. Owners and operators of new equipment typically follow OEM recommendations, which will drive demand for commercial automotive lubricants.

4. Chinese investment in Argentine infrastructure

China is expected to play a key role in the economic recovery of Argentina between 2020 and 2025 as President Fernández gravitates toward the Asian giant to negotiate the entry of the country in the belt and road initiative. Fernández proposed investment projects valued at over USD 30 billion in a May 5, 2021 visit to Beijing, covering sectors ranging from mining and energy to construction and agriculture.

The plan considers more than 20 projects related to energy and infrastructure which include renovation of the infrastructure of the four train lines (one specifically to transport soy from the interior to the port of Buenos Aires), the installation of intelligent pig farms, and the construction of the Nuclear IV power plant. Finally, China will invest in the mining of copper and lithium. [5]

Why is this an opportunity? Proposed Chinese investment in Argentina from 2020 to 2025 will generate more than 20,000 new jobs and require the purchase or importation of equipment specific to each industry, driving demand for automotive and industrial finished lubricants across many industry sectors.

5. Private-sector construction on the rise in Argentina

In 2020, construction represented 5% of off-road lubrication use in an industry that collapsed by 22.8% due to pandemic-related shutdowns.
Manpower Group Argentina conducted its Employment Expectation Survey (ENE) in December 2020 to gauge the outlook in Argentina for 2021. It projects the biggest growth for Argentina’s construction industry, which is expected to expand by over 10%. The 2021 rebound in the Argentine construction sector is driven by factors such as investments in public works by the government, along with tax benefits implemented to push housing construction and pandemic-related lifestyle changes that have forced people to stay at home longer and invest in works and improvements. By April 2021, Argentina’s construction industry had grown by 71% compared to 2019, with most contracted works carrying out operations as “business as usual,” with only 9% of firms still unable to perform due to COVID-19 restrictions. [6]

Why is this an opportunity? Private construction projects in residential units and logistics parks — including demand for warehousing locations to accommodate the growth of e-commerce — will sharply drive demand for commercial automotive lubricants in Argentina during the second half of 2021.

LATAM Finished Lubricants Market Overview

Beyond Argentina’s lubricants demand growth, Latin America’s finished lubricants market also offers opportunities for global and local companies looking to adjust strategic plans for the region. LATAM’s lubricants demand is rebounding, despite COVID-19 continuing to plague the region, as governments ease restrictions to recover economic activity. For example, better-than-expected passenger vehicle sales in key markets such as Mexico, Brazil, and Colombia offer a glimpse of hope. New passenger vehicle sales in Mexico recorded a first-quarter net growth of 3.3% in 2021. [7] In Brazil, accumulated sales of new passenger vehicles are up 32% compared to the prior year, [8] with sales of BEVs/HEVs//PHEVs registering the strongest quarter in history, up 29.4% in contrast to the same period in 2020. [9] Colombia also witnessed extraordinary new passenger vehicle sales, up 86.6% versus March 2020, while year-to-date sales of BEVs/HEVs/PHEVs increased 248.7% for a total of 3,651 units [10].

The mining sector in Latin America also brings good news to lubricants suppliers, as operations fire on all cylinders with silver, gold, copper and even zinc at high values. These metals represent Mexico’s, Chile’s, and Peru’s leading mining operations, and the jump in values supports Kline’s view of a projected 35% growth in Latin American mining in 2021. However, this trend may put the industry on the governments’ radar for increased taxation.

Why is this important? Heavy visgrades (25Ws, 20Ws, and 15Ws) account for 63% of PCMO in LATAM due to the average age of the vehicle parc. However, with the influx of newer vehicles, the trend will continue to move to lower viscosities (5Ws and 0Ws) fueled by the modernization of the parc, the growth of EVs, and OEM recommendations.

Although new tax impositions are more difficult to execute since most agreements between mining companies and governments are protected by international arbitration, elections in Chile, Colombia, and even Ecuador may put the mining industry under tax pressure, depending on their outcome. [11]

Click here to find out more about our upcoming report on Latin America’s Finished Lubricant Market Overview, which offers detailed data on the potential opportunities in sectors in a wide range of countries.
If you are interested in gaining knowledge of Argentina’s lubricants market beyond the five opportunities outlined in this post, CLICK HERE.

Argentina is also a part of Kline’s Global Lubricants Market Study, where its market can be included in the customized report which covers your choice of 10 country markets and/or supplier profiles and offers a comprehensive Year in Review summarizing the overall global lubricants industry. MAKE SELECTION NOW.

Footnotes:

  1. Argentine Chamber of E-commerce (CACE), https://www.cace.org.ar/
  2. Focus Marketing
  3. https://www.jornada.com.mx/notas/2021/06/07/economia/mexico-noveno-pais-en-reservas-de-litio-asegura-informe-en-eu/
  4. https://www.caem.com.ar/
  5. Telam https://www.telam.com.ar/notas/202009/510456-china-argentina-relaciones-bilaterales.html
  6. https://www.forbesargentina.com/today/cuales-son-expectativas-construccion-2021-n5062
  7. https://soloautos.mx/noticias/detalle/ventas-autos-mexico-abril-2021/ED-LATAM-23718/
  8. https://g1.globo.com/economia/noticia/2021/06/02/venda-de-veiculos-novos-no-brasil-cresce-em-maio-estoque-segue-baixo-diz-fenabrave.ghtml
  9. https://insideevs.uol.com.br/news/507129/carros-eletricos-vendas-brasil/ 
  10. https://autosdeprimera.com/noticias/noticias-nacionales/ventas-autos-nuevos-colombia-marzo-2021/
  11. AMI https://www.youtube.com/watch?v=zFf6k6bpXe4

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The State of Beauty: What Changes Will Outlast the Pandemic?

The State of Beauty: What Changes Will Outlast the Pandemic?

The cosmetics & toiletries market displayed outstanding resilience during an unprecedented year. Despite a marginal drop in 2020 sales, the market grew at a compound annual growth rate (CAGR) of 3%, registering increases, just as it had done since 2015, according to our Cosmetics & Toiletries USA report. 

Other toiletries and hair care were the only product classes to experience growth, while skin care and fragrances declined for the first time during the five-year historical period. Makeup was challenged even more as color cosmetics became a “can-wait” item. 

Brands leaned heavily on digital strategies and new marketing tools, like TikTok, to engage with consumers and provide them with opportunities to purchase products. This propelled growth for the e-commerce channel, which experienced booming sales in 2020.  

Key trends seen in previous years, like the move toward natural, clean, and sustainable products as well as wellness and self-care, have been amplified by consumers’ shifted values during the pandemic. What changes are likely to stay post-pandemic? How can beauty brands and retailers rejuvenate their strategy for continued growth?  

This highlights report dives into: 

  • The current and future state of the U.S. beauty industry 
  • Shifts in product classes and retail channels   
  • E-commerce performance and new developments in brick-and-mortar 
  • Key trends that are likely to grow in importance 

The insights and data in this highlights report represent select excerpts from our in-depth Cosmetics & Toiletries USA and Beauty Retailing USA reports, offering a 360-degree view of the industry’s performance, with forecasts to 2025. 

Next in Naturals: Greener Formulations Resonate with Consumers

Next in Naturals: Greener Formulations Resonate with Consumers

“Clean” claims are resonating more than ever with consumers, as the level of awareness surrounding ingredient safety and toxicity continued to increase in 2020. Brands leaned on this, creating extensive “free-from” lists, to promote the idea of safety. These claims were especially prominent in key categories such as facial skin care, hand and body lotions, and personal cleansing, where consumers valued safer options for everyday or essential products.  

Sustainability also grew in terms of importance, as brands giving back to their communities and making an impact on the environment were key points of differentiation during the coronavirus pandemic. These big moves led to a substantial increase of the truly natural segment, which, by far, outpaced the nature-inspired segment in 2020 and is set to win over consumers. 

What’s included in this complimentary report: 

  • Evolution of the natural and clean beauty market over the years  
  • Shifts in product class shares and key trends to watch 
  • A look at the leading natural players with snapshots of fast-movers such as Hand in Hand, Hello Bello, Live Clean, among others
  • The role of sustainability and key initiatives for brands like Weleda, Alpyn Beauty, Native, Hello Products, and more
  • Spotlight on retail channels, highlighting wins and losses 
  • Market predictions up to 2025  

To get a full view of the dynamic market for naturally positioned, clean, and organic beauty and personal care products, refer to our Natural and Clean Beauty Global Series report. The study looks at key markets like Brazil, China, Europe, and the United States to assess brands’ true degrees of naturalness based on Kline’s proprietary rating scale. 

 

What Do People Expect from ‘Clean Label’ Foods & Beverages?

What Do People Expect from ‘Clean Label’ Foods & Beverages?

What Do People Expect from ‘Clean Label’ Foods & Beverages?

(originally written for Nutraceuticals World)

What Do People Expect from ‘Clean Label’ Foods & Beverages?

Within the growing phenomenon of “wellness” and “well-being,” an increasing number of consumers opt for food and beverage products that they perceive to be “clean” or “natural.” Given the absence of the specific definition of “clean,” consumers interpret it in their own way, defining it as products that have “no chemicals/no artificial additives” or “all-natural ingredients.”

 

Consumer Perception of “Clean” Products

Kline’s Clean Label in Food & Beverages: Perception vs. Reality study found that approximately half (48%) of the consumers surveyed purchase products that are labeled “clean” or “natural.” Out of those who state that buying clean or natural foods is important to them, more than half believe that such products have positive implications for their health; one-fifth are reluctant to ingest chemicals and artificial ingredients.

Buying clean or natural is more important in some categories than in others. For instance, baby food, meat and poultry, and milk from animals are categories where consumers lean toward cleaner and more natural products.

 Categories in which Clean and Natural Products are Most Important

Categories in which Clean and Natural Products are Most Important

Source: Kline’s Clean Label in Food & Beverages: Perception vs. Reality

“All-natural” was considered the most important element in selecting baby food, followed closely by “no added sugar” and “inspected by the USDA.” “Hormone-free” and “antibiotic-free” are key considerations of consumers when buying meat and poultry, while “preservative-free” and “minimally processed” are of top importance in cultured meats.

In packaged foods, “no preservatives” and “no artificial flavors” are neck-and-neck for the most important element. “No artificial flavors,” “preservative-free,” and “no added sugar” all rated highest in importance to those shopping for hot beverages.

When choosing a product, most consumers pay attention to price and nutrition information, and more than half of them avoid certain ingredients. Sugar, corn/corn syrup, artificial additives and artificial sweeteners, and fructose are the top ingredients that consumers avoid.

Top 20 Ingredients Avoided by ConsumersTop 20 Ingredients Avoided by Consumers

Source: Kline’s Clean Label in Food & Beverages: Perception vs. Reality

Ingredient listing and labeling is another important factor of consideration. While consumers generally trust the brands and their labeling, they do believe that the fewer ingredients a product has, the cleaner and more natural the product. There are no current scientific, legal, or regulatory definitions for clean-label ingredients. However, generally, three main criteria are followed to recognize an ingredient as clean label: Ingredients should be naturally derived, non-GMO, and easily recognizable or do not have a chemical-sounding name. To get a quick snapshot of key consumer research findings, download Kline’s Navigating How U.S. Consumers Perceive “Clean” in Food and Beverages infographic.

Key Retailer Initiatives to Attract Consumers Looking for “Clean” Products

Retailers play a vital role in establishing labeling standards and requirements for clean and natural products. Specialty stores such as Whole Foods and Trader Joe’s have stricter requirements for clean products and their labels. In fact, Whole Foods is the most notable national grocery chain catering specifically to this movement. Not only must brands adhere to a strict list of banned ingredients, but they must also offer proof of humane animal husbandry practices.

Conventional grocers, such as Target, are also establishing banned ingredient lists or creating clean or natural seals identifying brands that offer clean products. However, other grocers, such as Kroger and Wegmans, do not require products or suppliers to follow rigorous guidelines due to a large number of conventional product offerings.

Labels also vary significantly by product category and retailer. In the baby food, hot and cold beverages, cereal, and sweet and salty snacks categories, product offerings from more conventional retailers, such as Kroger, Target, and Wegmans, do not feature clean or natural labels.  In contrast, Whole Foods highlights the naturalness of a product through a percentage, such as “100% whole wheat” or “made from 100% fruit.”

Prevalence of Clean Labels in Key U.S. Retailers by Category

Prevalence of Clean Labels in Key U.S. Retailers by Category

Source: Kline’s Clean Label in Food & Beverages: Perception vs. Reality

The most common label across all retailers focuses on animal welfare standards for meats, such as how the animal was raised or that it has no added antibiotics or hormones. Other common labels include “organic,” “non-GMO,” “100% whole wheat,” and “gluten-free.”

Interesting to note is that organic products are a common private-label line. If a retailer does not have a separate line for these products—as is the case with Whole Foods—organic products are identified through labels on packaging.

Rising Market Opportunities to 2024

As consumers become increasingly ingredient-conscious, clean and healthy eating will remain a vital part of the consumer lifestyle. According to Kline’s Clean Label in Food & Beverages: Perception vs. Reality, the U.S. clean-label food ingredient market is expected to grow at a CAGR of 9.3% by 2024. Consumers will largely continue to be responsible for determining what it means to be clean or natural and what the standards will be. This will continue to vary drastically by person, as a common definition establishing the requirements for clean or natural food and beverage products is not expected to occur within a five-year forecast period.

Retailers will also take more initiatives in establishing clean and natural food standards. Conventional grocers such as Walmart may establish seals that signify healthier options. More naturally positioned grocers will also be on the rise, especially on a national level, to compete with Whole Foods.

Some labels are expected to remain popular on product packaging, while others will fall off in favor of trendier labels. The exclusion of artificial additives is expected to remain one of the most prominent labels on packaging. Organic and natural labels will also remain a prominent product label. As new diets and fads rise in popularity, marketers may use labels that call out compatibility with particular diets. For example, as the keto diet continues to rise in popularity, more labels are beginning to indicate whether they adhere to keto standards.

The market will continue to witness a rise in more truly natural or clean food and beverage products, as consumers prefer to seek products that are healthier. Greenwashing and clean-washing are expected to diminish as consumers have more access to resources to better educate themselves. Retailers may also enforce stricter standards, preventing these marketers from misleading consumers.

For a deeper dive into the importance of clean label in key product categories as well as an in-depth analysis of the ingredients used within these categories, along with brand offerings and their ratings, refer to Kline’s Clean Label in Food & Beverages: Perception vs. Reality study. To receive timely insights on the food nutrition industry, sign up for our newsletter here.  

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