Base oil and lubricant product trends

As can be seen in Figure 2.1 world demand for lubricants has been broadly static over the past 10 years, with a slight decreasing trend.

However, static global demand masks regional variations that show demand falling in North America and Western Europe and, to a lesser extent Latin America. Conversely, the Asia-Pacific region and Central and Eastern Europe are exhibiting growth rates in the region of 2% per annum (see Table 2.2).

Figure 2.1. World lubricant demand (including marine oil)

Figure 2.1. World lubricant demand (including marine oil)

Fuchs Petrolub

Source: FUCHS Petrolub AG Manheim - Paper to 7th ICIS LOR base oils conference, 2003.

Source: FUCHS Petrolub AG Manheim - Paper to 7th ICIS LOR base oils conference, 2003.

Table 2.2. World lubricant demand (excluding marine oils) by region

Region

2001

2002

Percentage change

(000 t)

(000 t)

N. America

8 750

8 590

-1.8

Latin America

3 050

3 035

-0.5

Western Europe

4 930

4 885

-0.9

Central/Eastern Europe

4 610

4 690

1.8

Near/Middle East

1 820

1 840

1.0

Africa

1 790

1 815

1.4

Asia-Pacific

10 610

10 820

2.0

World

35 560

35 675

0.3

Source: FUCHS Petrolub AG Manheim - Paper to 7th ICIS LOR base oils conference, 2003.

This pattern in relative growth rates reflects a certain degree of "catch-up", with the fastest growing areas those in which demand is at relatively low absolute levels. Table 2.3 gives lubricant demand per capita for the same regions. Global average lubricant demand per capita of 5.9 kg masks significant regional variation, with North American demand over 10 times that of sub-Saharan Africa.

While demand is clearly shifting away from the large markets in North America and Western Europe, supply remains relatively concentrated in these regions. This is reflected in the significant capacity surpluses in these two regions. Asia-Pacific also shows a surplus (see Table 2.4).

Table 2.3. Regional lubricant demand 2001 per capita

Region

Kg per capita

Table 2.3. Regional lubricant demand 2001 per capita

Region

Kg per capita

N. America

28.7

Australia/Oceania

18.1

Western Europe

12.6

Central/Eastern Europe

11.0

Near/Middle East

10.7

Latin America

6.2

Asia

2.9

Africa

2.4

World

5.9

Source: FUCHS Petrolub AG Manheim - Paper to 7th ICIS LOR base oils conference, 2003.

Table 2.4. Capacity surplus/deficit by region

Region

Capacity surplus/Deficit (-) 000's tonnes

N. America

2 410

Latin America

-535

Western Europe

2 405

Central/Eastern Europe

445

Near/Middle East

-230

Africa

-810

Asia Pacific

1 280

Marine

-1 585

World (incl. marine oils)

3 380

Source: FUCHS Petrolub AG Manheim - Paper to 7th ICIS LOR base oils conference, 2003.

Source: FUCHS Petrolub AG Manheim - Paper to 7th ICIS LOR base oils conference, 2003.

ICIS LOR (Independent Commodity Information Services-London Oil Reports) prices since 1997 show the degree of correlation between crude oil prices and those of base oil. In broad terms, the refining process adds 2.6 to 3 times the average value of a barrel of crude oil whereas gasoline or diesel adds approximately 1.5 times. Given the high degree of value added in the production of base oil, it is not surprising that the correlation is not particularly strong (see Figure 2.2).

Figure 2.2. Base oil and crude oil prices (1997-2003)

Base Oil & Crude Oil Prices

Figure 2.2. Base oil and crude oil prices (1997-2003)

Base Oil & Crude Oil Prices

Base Oil Prices

But what is of interest is the variation of crude oil prices: because recycled lubricating oil can fully substitute for the product derived from virgin oil, the volatility of crude oil prices as well as high prices can benefit to markets for recycled lubricants by favouring the demand for such materials.

The market is relatively concentrated. Shell, Exxon Mobil and BP Amoco are market leaders in the world lubricant market with approximately 34% of the market. The remainder is shared between 13 companies such as LukOil, Nippon Oil, Conoco Phillips and PetroChina Sinopec.

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