Kline’s Basestocks Survey Extras for Europe
by Gabriel Tarle, Project Lead, Kline Energy
July 31, 2020
At the initial surge of the COVID-19 pandemic in March-June 2020, Kline conducted interviews with market experts for the Global Lubricant Basestocks study published annually in Q3. While researching the European market, we asked some questions on the impact of COVID-19 to gauge the market sentiment. Learn what questions were asked and how market experts responded
When do you expect European basestocks demand to begin recovering?
Most respondents believe basestocks demand will start recovering within 6-12 months. Other responses were skewed . The survey reveals that market participants do not have a clear picture of European basestocks demand during the COVID-19 pandemic.
When do you expect European basestocks demand to recover to pre-pandemic levels?
Compared to the first question, the industry participants seemed to agree that demand should reach pre-pandemic levels in more than nine months; half believe it will take more than a year. However, it is important to note than within the “>1 year” category, few mentioned 2-5 years, and some answered 1-3 years.
Kline believes that many industry experts believe in a slow recovery and not a “V-shaped” one. It is interesting to note that at the time of the Great Lockdown, industry participants did not know when demand would start recovering, but they were more certain that a full recovery should come in more than one year.
Which API basestock group will suffer the most following the COVID-19 pandemic?
Most respondents believe API Group III basestocks will take a hit due to the COVID-19 pandemic, and some went as far as calling it a “sitting duck.” Only a few considered API Group I and API Group II. Almost all respondents see more declines coming for the PCMO product category. HDMO has received a positive outlook.
This survey aligns with Kline’s preliminary assessment of the Impact of COVID-19 Containment Effects on the European Finished Lubricants Market and the Impact of COVID-19 on the Global Lubricant Basestocks Market. A sharp decline in basestocks demand is expected due to COVID-19. The actual magnitude of this decline will depend on the length and severity of the lockdown. While the decline in demand will be first borne by Group III/III+, owing to its higher usage of PCMO products, Group I demand will suffer the most in the longer lockdown situation; it will be closely followed by Group II. This decline in demand will be accompanied by a decline in the availability of basestocks.
A contraction in the consumer lubricants market is having an immediate impact on demand for Group III/III+ basestocks, especially in markets with higher penetration of high-quality passenger car motor oils (PCMO). The lockdown has resulted in a severe reduction in the use of passenger vehicles and motorcycles for personal mobility. In France and Italy, motorists were not allowed to leave their places of residence. Consequently, fewer motorists are in need of changing or topping off the oil for their vehicles and face many logistical challenges if they choose to do so. Numerous workshops have chosen to close in the face of depressed demand. Others have elected to remain open only for emergency repairs, which may or may not include oil changes, or the servicing of vehicles used for emergency services (ambulances, fire brigade, police, etc.). Workshops are among the few businesses that were permitted to remain open, as they offer an essential service. However, some regional governments in Germany—for example, in Bavaria—have prohibited them from operating at full service during the lockdown.
It is worth noting that Kline has recently commissioned the Global Lubricants: Analysis of Impact of COVID-19 report to assess the impact on the finished lubricants market, along with emerging market opportunities and challenges in the post-COVID-19 market for a number of markets.