Kline: Re-refining of used oil to rise to 46% by 2032

Interest in used oil refining continues to grow as countries become more environmentally conscious. Global collection rates currently sit at around 68%, according to market research and management consulting firm, Kline. Although, collection rates are higher in 13 key markets that include Canada, China, the U.S. and Western Europe—mainly due to better collection infrastructure and the implementation of regulations in these markets.

Only a very small percentage of used oil is re-refined, says Kunal Mahajan, project manager at Kline. Speaking at the Asian Lubricants Industry Association (ALIA) Annual Meeting on June 13, Mahajan discussed Opportunities in the Used Oil Industry in Asia, where he acknowledged very few mandates require used oil that is collected to be re-refined. Used oil is mainly disposed of as fuel, he says. Although, use as a fuel is lower in key markets.

Regulations are vital to the used oil industry. Without them, it will not function at all, says Mahajan. Used oil is treated as hazardous waste, therefore, it is heavily regulated and there is virtually no trade—import or export. There are also restrictions on the technology and processes that can be used. 

During his presentation, Mahajan outlined several key challenges limiting the growth of re-refining of used oils. The most noteworthy challenge facing re-refiners is the lack of supply of “good enough quality” used oil.

Most used oil re-refining is geared towards Group I base stock products. However, demand for base oil is shifting to Group II and III, says Mahajan. There is excess capacity of virgin Group I base oil plants competing for excess supply, but demand is shrinking. Mahajan noted that Europe is the only region with Group III re-refining capacity, although, capacity constraints are limiting growth in the region.

Many countries have no re-refining capacity, including Japan, South Korea and Thailand, meaning used oil must be used as fuel. In India, where there is ample refining capacity (although not necessarily for re-refining), the quality of used oil remains an issue. Regeneration rates of used oils are a function of the lubricant mix in your country, says Mahajan.  

Mahajan, who has 16 years of market research experience, noted that re-refiners prefer automotive engine oils due to the low cost of collection, as they are typically located in urban centres, and as they comprise 50% of lubricant demand. Availability of used engine oils is set to shrink alongside the growth of electric vehicles. Industrial oils have greater impurities and collection costs are higher, he says.

Used oil collection is expected to grow from 2027 and 2032 due to better implementation of regulations and improvements in collection infrastructure. Globally, the share of re-refining in the disposal of used oil is expected to rise to 46% by 2032, driven by growth in re-refining in China, says Mahajan.