Economic uncertainty continues to mitigate the North American and European lubricant markets while the Asian market has remained resilient, claiming some 43% of global demand, according to latest study Global Lubricants 2010: Market Analysis and Assessment by international consulting and research firm Kline and Company. “However, within the overall Asian market, it’s also important to distinguish what parts of the market are ’accessible’ and what parts are ’quality’ because this is the opportunity for IOCs in the emerging world,” notes Geeta Agashe, Vice President of Petroleum & Energy Practice at Kline.
Kline’s study finds that overall, global lubricant demand increased by an estimated 6% over 2009, but still trails pre-recession levels. The market is also getting more competitive with increasingly ambitious NOCs and Independents challenging the IOCs, not only on price, but improved performance of their products. Shell maintained its #1 market share position in 2010, accounting for a 13% market share, followed by ExxonMobil claiming 11%. Shell helped consolidate its dominance by improving its positions in the emerging markets, particularly China, Indonesia, and India, among others, and further developing OEM relations with Daimler, Hyundai, Honda, Suzuki, Renault Nissan, and Chinese OEMs, expecting a “halo” effect from that first-fill leading to after-market sales. ExxonMobil is continuing to focus on the “value” end of the market.
On a per country basis, the United States remains the world’s largest lubricant consumer by volume, although its dominance has declined to around 23% despite historically accounting for a quarter of global lubricants demand. The increasing penetration of synthetics in the North American automotive sector, while negatively affecting volumes, has compensated by boosting value. Similarly, the European market remains sluggish for reasons including high fuel prices deterring car ownership and use, continuing economic uncertainty and efficiency gains through downsizing and longer service-intervals. The one beacon of hope in Europe for volume growth might be Russia if its government’s modernization programs are successfully implemented.
The demand for lubricants in the BRIC countries, in particular China and India, continues to grow quantitatively and qualitatively, driven by both industrial activity and growth in the commercial and passenger vehicle population. Kline reports that this latter phenomenon has spurred a manifold augmentation in quality through the implementation of global OEM specifications, improvements in packaging to deter adulteration, and greater brand awareness. This is well reflected in China where API Group III baseoil consumption has doubled every two years. Despite this, the caveat remains that price-points are often low and, given supply-links between state-owned enterprises and other factors, a significant part of this market remains inaccessible.
Kline’s findings caution that Asian growth may be temporarily tempered by declining exports to Western markets, domestic inflation concerns, and a consequent slowdown in automotive sales. The report notes that in India interest rates have increased 10 times within the last two years thereby restraining car-ownership growth, and Japan’s recovery from a devastating earthquake and tsunami has seen resultant domestic reconstruction crimped by power-shortages and disruptions to manufacturing supply chains.
Although market conditions remain volatile and the global economy in protracted flux, Agashe observes that the demand for lubricants remains fundamental and that lubricants are essential to keep the world moving.
Kline and Company’s Global Lubricants 2010: Market Analysis and Assessment provides a detailed analysis of the global automotive and industrial lubricant industry segments and the players who participate in them.