Base Oil - Group II
Base oil is the major feedstock for all lubricants which has its key end use in automobile and machinery and personal and home care segment. Group II base oils are superior in terms of both physical and chemical properties and it is produced by hydrocracking process. OEM regulations and environmental concerns in the Western markets have not only changed the lubes consumption pattern there but has also impacted the fundamentals of tier I feedstock base oils market.
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Exxon Mobil to continue operations at 380,422 tons/year Group I plant in SingaporeJuly 19, 2022
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Base Oil - Group II market frequently asked questions
As per Beroe's base oil market analysis, the major players in the global base oil market are North America (39%), EU (3%), Asia (56%), and other countries (1.2%).
Beroe's base oil report highlights certain base oil price trends as well as market updates. As per the report, a huge demand is expected from the industrial segment in Asia. Considering the industrial lubricants sector is one of top consumers of base oil, rise in mining activities is considered to drive the demand. A considerable demand is also expected to come from the automobile sector due to a rise in vehicle production. A sustained shift towards pure base oils has created a rise in group II quantities.
The global base oil market is expected to grow at a CAGR of 3 percent by 2022.
As per Beroe's base oil market analysis, major demand is expected to arise from Asia and the US as most of the derivative units, including industrial, automobile, and metal processing are located in Asia. The automobile and the mining sector with a growth of 2-3% and 3% respectively are expected to be the key segments propelling the demand. Automobile and lubricant sectors are expected to drive a significant amount of demand.
Base Oil - Group II market report transcript
Global Base Oil Market Outlook
The global base oil market is expected to grow at a CAGR of 3% during 2020–2024. The robust demand growth from Asia, especially the industrial segment, is expected to drive the demand for base oil, and demand for the industrial vertical is expected to grow at a CAGR of around 4%.
The industrial lubricants sector is the second largest base oil-consuming segment in the global market. Increasing mining activities in Asia are expected to drive the demand for group II base oils.
Base Oil Market - Demand 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 as most of the derivative units (industrial, automobile and metal processing) are lined up in Asia.
- This is majorly driven by mining activities in China, Mongolia and Australian markets
- The automobile (2-3% growth) and the mining sector (3% growth) are the key segments driving the demand. Around 1.5 MMT capacity additions are planned for lubricant production.
Global Market Size - Group II Base Oils
- Increasing demand for greases, industrial lubricants, thermal oils, and hydraulic fluids derived from raw stock fluids such as base oil is fueling the growth of the global base oil market.
- Significant growth will come from the automobile sector due to the consistent increase in vehicle production in the global market.
- BRIC countries (Brazil, Russia, India, and China) are offering lucrative growth prospects for base oil producers during the projection timeframe. The World Bank has estimated that the BRIC countries are home to around 41% of the global population, which will multiply further.
- To satiate the demands of the ever-growing population, policymakers in these nations are increasingly focused on industrial development. With the fortification of the financial infrastructure in these regions, domestic and foreign investments are likely to increase explosively over the coming five years.
- This will boost all the relevant industries such as base oil and lubricants.
Global Base Oil Market Outlook
- This section of the report divides the global market geographically and presents key insights into the regional base oil markets. The regional demand-supply dynamics are studied. These facts are essential to understanding the regional peculiarities and dynamics.
- Amidst the COVID-19 pandemic, the demand for base oil has been disrupted in 2020 due to supply chain disturbances related to major feedstocks and a drop in demand from the end-use industries.
- Crude oil prices and availability have been turbulent since early 2020 due to the subsequent restrictions that have hindered the business of the end-use industry spectrum including the automotive and chemical industries. This has resulted in the uneven supply of feedstocks and thus sluggish business progress of end-use industries.
Global Trade Dynamics
South Korea and Singapore remain as net exporters in the Asian market: Low feedstock cost and low demand for group II base oils in the domestic market made these countries net exporters to Europe and other Asian countries
Europe remains a net importer, due to the non-availability of feedstock and low production in the region: Changing dynamics in the Western markets has resulted in increased usage of group II base oils in all the major downstream sectors (automobile, Industrial, process, and metalworking lubricants). This has left fewer base oils for other derivatives, turning Europe into a net importer. This trend is expected to continue for the next five years
Regional Base Oil Market Outlook
Asia Pacific (APAC) will remain at the driver’s seat in the global base oil market over the forecast period. Major demand is coming from the industrial and automotive manufacturing sectors in emerging economies such as India, China, and Southeast Asia.
Furthermore, the conducive regulatory framework focused on promoting energy efficiency from automobiles and industrial equipment and machines will bode for the regional base oil market over the next few years.
China is attracting huge stakeholders’ attention owing to the presence of natural resources. The country is witnessing a rising demand for industrial goods in tandem with automobiles within and outside its geographical borders.
Furthermore, China offers cheap and skilled labor at scale and is characterized by several manufacturing units thriving to become the leading global exporter of every essential commodity.
Global Capacity-Demand Analysis
The consistent shift towards highly pure base oils has led to increasing in group II capacities: Rising environmental concerns and regulations proposed by OEM's have consistently increased the demand for group II base oil demand. Moving forward the same trend is expected to continue due to the improved demand from the automotive segment from developing countries
Demand for light vehicles to grow at a CAGR of 3-4 percent: Increasing light-vehicle sales is expected to drive the demand for automobile lubricants through 2020
Group II capacity additions are planned in Asia and the US: Changing dynamics in the US resulted in almost 30 percent of the players switching from group I to group II capacities. The US is expected to remain a net exporter with excess group II supply in the domestic market
- One year contract with quarterly price revisions: In the US and Europe, players can engage with year long contract with quarterly price revisions
- Spot buying is preferred in Asia: In Asia, spot buying is mostly preferred, since the consumers buy group II base oils and convert it in house for their personal care applications
- Bulk cargo shipments are preferred for contract buying: CPG players can buy their volumes in bulk at one stretch to save ocean freight charges and increase volume discounts
- The base oil market report shows that surplus supply in the U.S. market makes it the best sourcing destination for the European and Asian base oil market.
- In North America, Group II can be substituted with group III in machinery and engine oil applications. However, intensive processing the production cost thus incurred, would weigh down the advantage of moving to Group III from Group 1 base oil.
- Since Group II base oils are produced through hydrocracking at varying boiling points ranging from 300 degree Celsius, gas is used as a burning agent in the refineries. Hence, gas prices play a major role in deciding the base oil market price
Global Demand by Application
Group II base oil finds its end-use application in CPG in the form of solvents used in the production of cosmetics and personal care products. Growing demand (CAGR of 3–4 percent) from large volume buyers, like mineral oil, industrial and process oils in the Europe market, are expected to pose a supply threat to small volume CPG players
Downstream Demand Outlook
Demand for automobile lubricants and greases to grow at a CAGR of 2-3 percent: Due to increasing light vehicle sales in developed regions and heavy-duty containers sales in the developing regions, demand for auto lubricants is expected to increase during the next five years
Demand for metalworking fluids is likely to increase due to an increase in mining activities in the US market. The mining industry has been showing tremendous growth in the North American market and it is expected to grow at a CAGR of 3 percent till 2023
Process oil is expected to grow at a CAGR of 2-3 percent: Investments planned in rubber production is expected to increase the demand for process oil during the next five years
Industry Drivers and Constraints
Demand from automobile lubricants and automotive oil will drive the demand for Group II base oils for the next 3-4 years. Shift towards cleaner fuels and cleaner industrial lubricants from western markets to drive the demand for Group II base oils and lubricant base
Growth in industrial lubricants segment
Industrial lubricants and the industrial oil segment is expected to grow at a CAGR of 2-3 percent across the world, which is likely to pull the demand for Group II base oils and lube base and other base formulations
Firm demand from mature markets
North American and European markets which consume Group II mainly for auto lubricants production is expected to pose steady demand for Group II base oils, due to the healthier base oil to lubricants conversion margins
Shift to lighter feed slate
Due to the LPG revolution in Europe, many cracker units have switched to cheaper ethane as feedstock rather than conventional naphtha, which has reduced the production of lower cuts in the European market
High-temperature hydrocracking unit has to be installed:
For producing group II base oils, a higher level of hydrocracking is required. All the refiners are not upgraded with the facility. The capital investment involved with maintenance issues makes most of the refiners reluctant to install these units.
Across the globe, 20 refiners are upgraded with this facility. Hence players who are forward integrated with lubricant (Independent lubricant blender) production only have this Group II production facility
Innovations, Trends And Events
This market report lists technological innovations if any that affect the base oil market. The most current trends and noteworthy must-know events are important information. The base oil market price is particularly sensitive to environmental issues and sustainability as well as the relevant innovations and regulations. The trends that result in response to the need for environmental sensitivity and sustainability are listed. This encompasses all stages of the industry’s processes in a cost-effective and energy-efficient manner.
Why You Should Buy This Report
- This industry report on the global base oil market outlook provides the cost structure and price analysis of Group II base oil.
- The report provides the base oil price trends, supplier trends, global share, key profile and does a SWOT analysis of major base oil suppliers like Chevron Phillip, Exxon Mobil, Sinopec, and LyondellBasell.
- The report lists out the key drivers and constraints and does Porter’s five force analysis of North America, Europe, and Asia base oil market.
- It lists out the key technological trends and innovations for the regional base oil markets.