The global basestock market felt a colossal impact on demand and supply as a result of the COVID-19 outbreak, and brightstocks were no different. Per Kline’s analysis, the brightstock demand declined by approximately 7.5% in 2020 compared to the demand registered in 2019. While the global market was impacted by demand shock during the initial period of COVID-19, the latter phase witnessed supply shock as well, since brightstock supply was in a deficit. This was a result of low basestock production, especially for Group I (including brightstocks), because of unfavorable refinery economics. Due to low fuel demand caused by pandemic-related restrictions, margins for fuel have declined considerably. As a result, refiners are not able to cash in on the current high margin regime for brightstocks, as their run rates are impacted due to constraints on the fuel side of operations.
Nonetheless, the long-term outlook for brightstocks remains positive. Despite the shock in 2020, the global market is expected to recover in the midterm and thereafter remain stable. Several industrial applications such as gear oil, greases, process oil, and marine oil will remain core to the demand for brightstocks. On the other hand, brightstocks continue to lose demand in automotive engine oil applications as the market shifts toward lighter–viscosity oils.
The market may also face challenges from the supply side as brightstock capacity is expected to shrink. Per Kline’s estimates, 8-10 KBD of global brightstock capacity may be at risk for closure in the long term, which will result in the market getting short by at least 5-6 KBD by 2030. This will create challenges as well as opportunities for market stakeholders. Kline’s recently published The Global Business Outlook for Brightstocks study takes stock of these challenges and opportunities in detail.