Global Market Outlook on Base Oil - Group II

  • Global, group Il market is expected to grow at a CAGR of 3 percent during 2017-2022
  • The roboust demand from Asia, especially industrial segment is expected to drive the growth from the base oil and demand for industrial area is expected to grow at a CAGR of around 4 percent
  • The industrial lubricants sector is the second largest base oil consuming segment in the global market

–Increasing mining activities in the Asian market is expected to drive the demand for group II base oils


Demand Market Outlook

  • The global group II base oil market has excess capacity and is expected to further increase in the next 2-3 years due to capacity additions, mainly in Asia 
  • Major demand is expected from Asia and the US market since most of the derivative units (industrial, automobile and metal processing) are lined up in Asia. The automobile (2-3 percent growth) and the mining sector (3 percent growth) would be the key segments driving the demand. Around 1.5 MMT capacity additions are planned for lubricant production

Industry Best Practices

  • Top sellers release the prices for base oils based on the previous month’s prices and current month’s market dynamics. Contracts are fixed during the early or mid of the month and the same is continued for two months. These are later released via public domain or IPROs, which are used as reference by other market participants for further negotiations
  • Spot buying is preferred in Asia: In Asia, spot buying is preferred due to surplus supply and low feedstock cost. Buyers look for domestic market condition and buy spot volumes ranging between 5000 –15000 MT from spot market. 
  • CPG players can also source as one time bulk shipment (Minimum 100000 MT) in order to reduce the ocean freight charges and gain higher discounts of about 15 percent
  • Preferred sourcing model: Multi sourcing model is preferred by the CPG players across the global market 
  • US and Europe engage in contract buying:In the US and Europe, buyers engage in two year contracts with large scale producers to secure supply and the prices are revised once in three months

Global Market Size-Group II Base Oils

  • Global group II base oil market is expected to grow at a CAGR of 3 percent mainly driven by increased demand for clear and high efficiency lubricants in the western markets and demand from industrial lubricant in Asian countries
  • Significant growth is expected to come from automobile sector due to consistent increase in vehicle production in the global market 
  • Demand from the Asian industrial segment is expected to grow at a CAGR of 3-4 percent mainly driven by mining activities in China, Mongolia and Australian markets