Infrastructure spending should help boost lubricant sales in Thailand

Shell Company of Thailand expects its lubricants business to grow by five to 10 percent over the next few years, Bangkok Post reported. Shell Company of Thailand has an 18% share of the Thai lubricants market, second only to state-owned PTT Plc.

After last year’s volatile market, Troy Chapman, executive director of Shell’s Southeast Asia lubricants business, predicts that this year will be more stable. “I think we will see quite a bit of stability. We are also optimistic about more investment coming into the country. The government is planning projects such as construction and economic stimulation,” Chapman told the Bangkok Post.

Lubricants demand typically tracks GDP (gross domestic product) growth. Thus, with a relatively flat GDP growth in 2014 of 0.8%, lubricant sales not surprisingly were flat or even declined in 2014.

“If you look back to 2014, when we knew that auto manufacturing faced a tough time, we saw our sales declining. Exports then slowed down as manufacturing was slowing down,” Chapman said.

Higher government spending helped boost the Thai economy in 2015 to 2.8%, according to the Asian Development Bank based in Manila, Philippines. GDP is predicted to grow by 3.0% and 3.5% in 2016 and 2017, respectively, with the planned infrastructure spending by the government. Thus, the expectation for improved lubricant sales in the coming years ahead.

Also, with the expected rise in lubricants demand after the integration of the ASEAN Economic Community (AEC), which has a combined population of more than 600 million people, Shell’s strategy to use Thailand as a major production base, as well as a regional hub to distribute lubricants to other ASEAN countries, should help boost sales even further.

“Thailand is a critical junction for ASEAN because of its position as a potential bridge. Almost all roads have to go to Thailand,” Chapman said.