11
FUELS & LUBES INTERNATIONAL
Quarter Two 2015
U.S. economy started to recover in
2014. “The markets in Asia-Pacific
are not only emerging markets,”
Gosalia said, “they are also mature
markets. Growth rates in India and
China are still there, but on a much
lower level than it used to be before,
and markets like Japan and Korea
actually declined in 2014.”
In 2014 there was a noteworthy
contrast between global lubricant
demand and per capita lubricant
demand. Globally, China had the
largest demand for lubricants,
but as a country among the top
20 lube-consuming nations, it
has the second lowest lubricant
demand per capita, less than
the world average, which is 5
kilograms (kg) per year. The same
is true for Asia-Pacific as a region.
This only means one thing: a
higher upside potential for Asia-
Pacific.
“This speaks to the volume
potential that China has,” said
Gosalia. “China is a market
in transition, on the edge of
becoming more and more a
mature market.”
In terms of China, there
are two forces working against
each other, he said. “What
happened in Europe and North
America over a period of 20
or 30 years is happening much
quicker in China because
on the one side, you’ve got
increasing motorisation and
industrialisation, so people who
were riding a bike may switch and
buy a car.” On the other hand,
“people don’t just want to buy a
car; they want to buy the best car”
in China, and those require high-
quality lubricants.
This contrasts with the
North American market, which
consumes the highest amount
of lubricant per capita by far:
nearly 20 kg per year, double
that of the average Western
European. However, “they [North
Americans] still have a long way
to go in terms of quality,” because
there is a higher tendency in
North America to buy a cheap car
or to use a low-quality lubricant.
Gosalia introduced data on
lubricant demand in China,
India, Japan, South Korea
and Indonesia to explore how
lubricant demand correlates
with other factors, such as steel
production, car production,
mineral oil demand and gross
domestic product (GDP) in
each country. Gosalia showed
data from 2007 to 2014, and in
each case, GDP and lubricant
demand grew apart from each
other, with lubricant demand
decreasing. As consumers have
more money in their pockets,
he explained, they tend to buy
higher quality products, which
means longer-drain intervals and
which translates to lower volume
demand growth.
Most people know that
the industry is increasingly
competitive, and Gosalia
presented data illustrating one
reason for this. Between the
mid-1990s and 2005, according
to a joint study by Fuchs and
the University of Mannheim
in Germany, the number of
independent lubricant companies
decreased from 1,500 to 590. The
number of “majors” decreased from
200 in the mid-90s to 130 in 2005.
(This study only included players
producing 1,000 tonnes or more.)
“This speaks to the
fragmentation of the industry,”
Gosalia said. “At the end of
2005, the top 10 manufacturers
made up 50% of the global lube
market, leaving the other 700
manufacturers to share the rest.”
This data came from a very
extensive study, which may be
repeated in a year or two, but for
now, the latest available data is
from 2005.
Factors causing industry
contraction include the
globalisation of national
oil companies, new market
participants, vertical
diversification, the role of private
equity, restructuring of majors
and retraction from niches. In the
past two or three years, Gosalia
said, there have been several
examples of large oil companies
that have “retracted from niches of
the lubes industry and left the field
open for other, more specialised,
focused lube companies… to buy
these businesses.”
Between 2000 and 2014,
the list of the top 15 lubricant
manufacturers was shuffled around
as a result of these phenomena.
Between 2000 and 2014, three
new players appeared on the list:
Petronas, Gulf/Houghton and
Pertamina. Other companies,
including Indian Oil Corp., AGIP
and Repsol, left the top 15.
In light of all this
restructuring, the word
“sustainability” takes on a
different meaning.
“These days, everything’s
sustainable,” Gosalia said.
The word has lost some of
its significance as so many
companies try to improve their
public image by “greenwashing.”
A much more real concern for
most companies is, literally,
sustainability—surviving in a
competitive and contracting
marketplace. Fuchs had to define
sustainability for itself so that it
could be measured, said Gosalia.
“What you cannot measure
you cannot manage,” Gosalia
said, “and what you cannot
manage, you cannot optimise.”
Fuchs identifies three levels of
sustainability. The first level is the
aforementioned “greenwashing;”
the second level is “sustainable
corporate control,” and the
highest level is “sustainable
enterprise.” Gosalia said that
Fuchs currently inhabits the
second level and is working on
moving to the third. A company
must be able to control and
improve itself internally before it
can aspire to bring sustainability
on social, ecological and
economic levels, he said.
“I think there is going to
be sustainable growth in the
Asia-Pacific [lubricants] market;
however, in the future on a much
lower level than we saw before,”
Gosalia concluded. Measured
in terms of volume, the growth
of the Asia-Pacific lubricants
industry may see a flatter slope
in the coming years, he said. But
its move toward higher quality
products means that it could be
contributing to the sustainability
of the other industries it serves.
Source: Fuchs Petrolub SE
