The increase of high-performing, cost competitive green base-oils, in the context of government regulations, supported by industry interest to develop innovative green formulations for various end users, is driving the bio-lubricants market growth. According to our recently published Opportunities in Bio-lubricants: Global Market Analysis study the outlook illustrates bio-lubricant growth will outpace that of finished lubricants. Bio-lubricants constitute a small percentage of the finished lubricants market globally. The United States is the largest consumer of bio-lubricants in the world, followed by Germany, Nordic countries, and Brazil close behind. China is the smallest, but also the fastest growing market researched in this study.
The reasons for the relatively limited uptake of bio-lubricants include lack of regulation and domestic labels, high-performing formulations that are up to par with conventional lubricants, high prices, and lack of suitable additives.
The most significant regulation passed to date is the Vessel General Permit, introduced by the U.S. Environmental Protection Agency. The VGP is expected to drive the demand for bio-lubricants, particularly in stern tube oils. Advancements in bio-lubricants industry are most prominent in environmentally-sensitive zones, led by federal procurement programs, tenders and self regulation by OEMs and trade associations, such as forestry and waterway associations.
Market dynamics in bio-lubricants vary based on the share of domestic and imported lubricant production. In markets with a higher share of imports, usage of bio-lubricants is typically driven by niche applications requiring premium bio-lubricants, resulting in high pricing levels. In markets with a larger share of domestic production, there is typically a leading application that drives the bio-lubricants usage, and prices are kept low.
The leading suppliers vary by region due to their established distribution networks. Statoil is a leader in Nordics, Quaker Chemical Corp. in Brazil, and Fuchs and Panolin in Germany. On account of their bio-lubricant focus and a wide range of products, Fuchs and Panolin are the leading suppliers of finished bio-lubricants globally, further driven by their global reach and OEM partnerships. They are complemented by Cargill who has a significant position in electrical transformer oils.
The leading market players established themselves through access to unique formulations, specific regional or industry regulation -such as transformer or forestry -or through the aftermarket of “green” OEMs. Examples include metalworking (Houghton International), marine (Vickers), railroad (Bechem), tunnel driving (Condat), and mountain equipment (York).
Growth of the bio-lubricants market will continue to reflect individual country regulations, domestic raw material supply, and available product technology. While regulation can be an incentive for growth increasing customer interest and driving blenders to develop relevant products, a regulation by itself, without the relevant enforcement, attractive offerings in terms of price and performance, and dedication won’t contribute to the segment’s growth. There will continue to be a degree of “trial and error” as suppliers explore and develop market niches. Successful product launches can subsequently be scaled up and rolled out into other markets, as it can be already seen happening in Europe.
Kline is hosting a complimentary webinar on key findings from the Opportunities in Bio-lubricants: Global Market Analysis on Wednesday, November 5, 2014 at 9 AM EST.