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 robust demand growth from Asia, especially industrial segment is expected to drive the growth for 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

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 lubricants 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

 Global Capacity-Demand Analysis

  • Consistent shift towards highly pure base oils has led to increase 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 automotive segment from developing countries

Market Outlook

  • 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 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

Engagement Outlook

  • 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