According to the Global Lubricant Basestocks report, the basestock market registered a very small growth in 2016 over the previous year. While Group II and III basestocks registered good growth rates, Group I continued on a downward trajectory. The global basestock market is in the middle of witnessing substantial structural changes. These changes are stimulated by changing demand patterns due to evolving technological and environment requirements, as well as changes in the supply landscape.
The year 2016 continued with the trend of shutting down of excess Group I capacity in parts of the world, including ExxonMobil (Beaumont, the United States), KPI (Rotterdam, the Netherlands), and Shell (Pernis, the Netherlands). This capacity reduction brought a temporary balance to the basestock markets in select regions of the world, but the overall supply glut continued. This glut was further abetted by new capacity streamlining in parts of the world, including Tatneft (Russia), CNOOC (China), and ADNOC (UAE). This new capacity is primarily dedicated to produce Group II and III basestocks.
On the demand side, new HDMO service categories—API CK-4 and FA-4—were approved though the ILSAC GF-6 timeline was further deferred. Nonetheless, the drive towards better quality lubricants is seen not only in developed markets, but also in developing markets, which is creating demand for better performance basestocks. The need to have better fuel efficiency and stricter emission norms is facilitating growth of high quality lubricants. While markets like the United States and Western Europe already have strict emission norms, other important markets like China and India are also making rapid progress towards enforcing stricter norms, which will further drive demand for better performance basestocks.
According to Anuj Kumar, a Project Manager in Kline’s Energy Practice, “The new basestock capacity addition continues as a number of projects are underway. This new capacity creation will outpace the demand growth for finished lubricants and result in supply overhang. Thereby creating even greater pressure on high cost plants to sustain operations.”
“Despite the supply overhang, there are segments of the market that hold strong growth potential. As the modern day passenger car engine’s requirements become stringent, there is a growing need for high viscosity index (VI) products,” comments Kumar. “A higher VI for a Group III basestock helps differentiate itself from mass-market basestocks. Sensing this need, some Group III suppliers like Petronas are making an upgrade from Group III to Group III+ in a phased manner.”
Anuj Kumar will be hosting a webinar on Global Lubricant Basestocks Market Trends on Tuesday, July 25, 2017 at 9:30 AM EDT. If you would like to attend the webinar, please click here to register.