Lubricants and Greases

Global Market Outlook on Lubricants and Greases

Global Market Size–Lubricants 

• The global lubricant market is estimated to have reached $160 billion in 2022 and is projected to reach $165 billion by 2023. The first month of the year in the lubricant sector was smooth despite the unfortunate carryover of the many challenges from 2021 into 2022. On February 24th, Russia invaded Ukraine, further straining the already troubled global supply chain for base oils. Both WTI and Brent prices have exceeded $100 per barrel since Russia's invasion of Ukraine, and freight costs have sharply climbed as well. As a result, base oil prices increased once more and in reaction to these steps, the majority of blenders declared in March that they would adopt a second, up to 15%, price hike on finished lubricants that would go into effect in April.

• The ongoing, grave shortage of lubricant additive supply is a crucial aspect to take into account in the context of lubricant price increases.

• It is anticipated that lubricant demand will be moderate in 2023, which should lead to lower prices throughout the year, provided there won't be any unforeseen disasters.

Global Supply–Demand Analysis : Lubricants and Greases

• The global estimated lubricant supply can be 37.5 MMT for 2023*. The market is currently oversupplied on a global scale, with about 0-1 per cent excess in 2023*. In 2023*, demand is estimated to increase to 37.40 million metric tons.

• The independent lubricant makers performed better in first three quarter of 2022 than some major oil corporations in their capacity to provide the market with specific types and grades of PCMO and HDEO, despite the fact that both had a severe additive shortage

Supply

• Russia–Ukraine war and the sanctions on Russia by Western nations are impacting the supply of base oil and lubricants negatively. The extremely serious shortage in lubricant additive supplies is another crucial aspect of the landscape of lubricant price increases to take into account.

• Afton Chemical closed its lubricant additive plant in Sauget, Illinois as a result of the Midwest experiencing devastating flooding in July, which made the current scarcity of additives even worse. Even when the force majeure was lifted in mid-September, blenders were warned that Lubrizol still did not have unlimited production capacity or output.

Demand Outlook

• Lubricant consumption increased in Q1 2022, due to high demand because of an energizing global economic growth but after Russia- Ukraine war started the distributors struggled to find finished products, logistics and prices, dealing with labor shortages, implementing six price hikes on lubricants. Notwithstanding low inventories, demand surprisingly dropped in the fourth quarter as well. Because prices were still high and there were economic concerns, it's possible that distributors and customers were wary of building inventory. Demand is expected to witness a recovery in 2023.

Industry Drivers and Constraints : Lubricants and Greases

Drivers

The automotive sector is expected to remain a major demand driver

• The automotive sector remains as the largest consumer of lubricant, accounting for around 57 percent of the overall consumption across the globe. With weak growth anticipated from the automobile sector globally, demand is expected to be lower

Demand from the industrial and food sector is expected to drive growth rates

• Process lubricants and food grade lubricant is expected to drive the demand, followed by the manufacturing industry. Growth will be weaker due to the economic slow down

Specialty lubricants have the potential for high demand growth from many new applications

• An emerging application area for specialty lubricants in process and special usage

• Specialty lubricants offer higher margins, and the segment is expected to show the highest growth in the coming years

Constraints

Substitutes market is growing steadily

• Group I is threatened by Group II and III mainly because of regulations mandating clean fuel

• 70 percent of the re–refined oil is Group II which is threat to virgin Group II supply

• Increase in synthetic oil usage is giving a threat to base oil Group III

Environmental regulations is hurting the business growth

• Stringent rules and regulations govern the lubricant industry. New investment in technology and equipment to keep abreast of the industry standards would restrict entry of new players

Increasing customer preference towards high performance lubricants

• The conventional mineral oil-based lubricant is under steady decline and as most of the old blending plants were based on mineral oil base stock, we expect to see closures or conversions of these refineries

Russia-Ukraine War

• Sanctions in Russia is expected to affect the export of base oil and supply of lubricants in Russia. Demand in Russia could also decrease due to a depression in economy