Challenges Galore for Basestock Suppliers Due to Shifting Market Environment, Analyzes Kline

PARSIPPANY, N.J., Sept. 23, 2019 /PRNewswire/ -- The global lubricant basestocks market faces a bleak outlook. In the past, any new capacity created was accommodated by relatively faster demand growth and the corresponding shutdown of inefficient plants, but the situation has changed, affected by a reduction in finished lubricant demand growth.

The adverse situation for global finished lubricant demand is the result of several factors, including the weak global economic outlook, much faster penetration of high-quality lubricants, and growing electric vehicles penetration. "Moreover, no major basestock plant shut down its operations last year, except Imperial Oil's Group I plant in Strathcona, Canada, while new capacity continued to be added. As a result, the market surplus increased, and margins took a hit for all types of basestocks," says Anuj Kumar, project manager for Kline's recently completed report, Global Lubricant Basestocks: Market Analysis and Opportunities. Kumar will present the latest insights and market challenges at Kline's upcoming complimentary WEBINAR.

The overall basestock demand growth is forecast at 0.4% CAGR during the period 2018-28 over the base demand for 36.5 million tonnes in 2018, shows the report. This is much slower growth compared to the past, reflecting the weakening growth in the finished lubricants market. On the other hand, new basestock capacity of around 5.0 to 5.5 million tonnes is expected to be set up over the same period. In an oversupplied market plagued with thin margins, much-desired normalcy (bridging supply-demand mismatch) can be achieved either by strong demand growth or by rapid capacity shutdowns. Clearly, the former is not happening, and only the latter can bring some normalcy.

On the demand side, Group II/II+ basestocks continue to make rapid inroads to lubricant formulations across the world. While these basestocks have remained a mainstay of the majority of lubricant formulations in North America, they have become the most widely consumed basestocks in the Asia-Pacific region as well. Europe, where demand for Group II/II+ accounted for a small share in the total region's demand, is displaying a growing propensity toward using Group II/II+ across lubricant formulations. This change, until last year, was primarily led by North American Group II/II+ marketers but gets a boost in 2019, as significant Group II/II+ capacity has been established in the region. Other regions also promise a rapid transition toward Group II/II+ basestocks.

A rapid growth for Group II/II+ basestocks would result in a faster decline for Group I basestocks demand, positioning Group I basestocks to a niche product. Some of the developing markets in the regions such as Asia-Pacific, South America, and Africa and the Middle East have also started to register a declining market for Group I basestocks.

Demand for Group III/III+ will be driven by rapid growth in demand for synthetic lubricants and newer, lighter viscosity grades such as SAE 0W-20 and 0W-16. Other synthetic basestocks like PAOs, synthetic esters, and polyalkylene glycol will grow at faster rates, driven by the need for synthetic lubricants in their specific applications.

Kline's Global Lubricant Basestocks: Market Analysis and Opportunities is published annually. The study offers an in-depth understanding of the current status of the basestocks industry in terms of basestock supply, basestock application space and demand, lubricant formulation trends, basestock pricing mechanism, inter-region trade, inter-material competition, and manufacturing costs.

About Kline

Kline is a worldwide consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the agrochemicals, chemicals, materials, energy, life sciences, and consumer products industries for 60 years. For more information, visit www.KlineGroup.com.

For more information contact:

Vera Sandarova
Marketing Communications
[email protected]

SOURCE Kline

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