The Lubricant Market and Latin America
By Daniel Bland - October 4, 2023
Twitter?@DanielBlandBiz
To all seeking to reduce friction in their lives,
Friction hinders progress and puts a strain on our lives as well as our operations! And as I cover petroleum derivatives such as motor oils and greases, let’s take a brief look at the market known as lubricants.
First of all, the global lubricant market is huge!? Valued at US$165bn in 2022, it is seen reaching US$188bn by 2027 with a 2.7% CAGR seen throughout the period.
THE BASICS
What are Lubricants?
Lubricant oils can be synthetic, plant-based, or petroleum-based, with the latter contemplating five steps to creation: exploration, drilling, transportation, refining, and treatment.
Lubricating Oils are mainly made up of Crude Petroleum, Natural Gas, and Chemical additives such as antioxidants, detergents, and viscosity improvers.
At least 90% of Lubricant is base oil, mainly made up of petroleum fractions called mineral oils, and less than 10% additives. Vegetable oils or synthetic liquids such as hydrogenated polyolefins, esters, silicones, fluorocarbons, and others are sometimes used as base oils.
While Oil (mainly mineral oil) and Grease are the most common Lubricants, Penetrating Lubricants, and Dry Lubricants are also products in the Lubricant industry.
In terms of minerals, Graphite?is a good lubricant all while Lithium grease is the most common lubricating grease in the world (75% market share). Magnesium stearate is the most used tablet lubricant for the pharmaceutical industry and Lubricants based on silicone, perfluorinated PFAE, mineral oils, and synthetic hydrocarbons (SHC or PAO), typically work well with plastics.
How is the market segmented?
What are Lubricants used for?
REFINING
Fuel refining requires a significant investment, a process which involves high pressure and hydrogen. Although re-refining of lubricants is similar, it is done to a lesser extent, so investment is less.
Lubricant re-fining, which involves removing water and contaminants and then exposing the product to pressure and hydrogen, has been on the rise since the turn of the millennium, mainly from Europe and the United States.
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Although re-fined base oils had a negative stigma to it in the past, this attitude is less today. Its main competitor is virgin base oil, a more expensive option that is closely tied into the price of crude oil. In the end, this also impacts re-fined base oil pricing.?
Keep in mind that not all lubricant recycling involves re-fining to create base oils. Some recycling goes toward producing fuel for industrial settings such as cement factories.
In the process of refining, note that only part (50%-70%) of the input – or to say recycled lubricant - becomes a finished base oil product. With that said, remember that the capacity to process is usually higher than the capacity to produce so do not get the two confused.?
The challenges of refining
There is a lack of products at refineries such as raw materials to produce base oils. Refining also releases a lot of paraffin which cannot be stored, and this ends up reducing refinery capacities.
Besides limited storage capacity, producers also need to deal with challenges such as power outages and costly producing methods which need to be improved. Also remember that lubricant prices are tied to the crude oil market so pricing can get quite volatile at times.
SOUTH AMERICA
Approximately 2.45bn liters of lubricants were produced throughout South America in 2021 and with the 3.37% CAGR expected, production could reach 2.89bn liters in 2026.
While the largest segment is the automotive industry, the fastest growing lubricant segment is Power Generation owing to the rising demand in the region for low-cost energy from natural-gas-fueled power plants. Brazil (motor vehicles, natural gas power plants, industrial machinery) is the largest market while Argentina (expanding vehicle ownership and growing gas-fired power plants) is the fastest growing market.
Brazil
Much of the lubricant market goes to the automotive industry so we cannot go without mentioning Brazil, the country with the largest economy, the highest population, and the largest number of vehicles in Latin America.
Currently, the country is transitioning to premium lubricant products to sustain the performance demands of its developing fleet.?Nearly 50% of its current fleet and more than 90% of new automobiles use synthetic or semi-synthetic motor oil. It is also projected that automotive producers will continue demanding engine oils that facilitate durability, secure emission control mechanisms, minimal viscosity, as well as fuel efficiency.
Argentina
Lubricants in South America’s second largest market, in terms of economy & automobile fleet size, is used for the construction, food & processing, oil & gas, and the automotive industries, with the latter seeing rising demand in the last few years. Argentina is also working toward the construction of numerous oil and gas pipelines which should boost its industrial lubricant business.
In general, when it comes to the automotive lubricant industry in South America, one of the main challenges is achieving a regional standard in the market so to meet the more stringent performance requirements by auto manufacturers. This, however, should open up many new opportunities.
To all lubricant specialists who want to contribute their expertise here or in an upcoming article, feel free to leave a comment below or send me a private message...
All the best,
Daniel Bland