US grease plants may close on higher feedstock

14 October 2008 17:19  [Source: ICIS news]

SCOTTSDALE, Arizona (ICIS news)--Five US grease plants have closed and that number is expected to rise as raw material costs escalate and as manufacturing moves Asia, a supplier said on Tuesday.

During the last five years, Brooks Technology, Fuchs, ExxonMobil, Southwest and Shell have closed grease plants, a producer told the Independent Lubricant Manufacturers Association (ILMA) meeting.

“Over the past two years, we have seen a major escalation in base oil, additive and packaging costs,” said Paul Converso of Battenfeld Grease & Oil. “I don’t see this changing for the near future.”

The price of feedstock crude oil peaked at $147.27/bbl in July, elevating the posted price for ExxonMobil’s Group I 250- grade base oil by 68% from one year ago to $5.19/gal, according to data from global chemical market intelligence service ICIS pricing.

Grease, a downstream product of base oils, is mainly used for industrial manufacturing and automotive and fleet mechanics.

While plants in the US are being closed, global grease production volume has grown 42% since 1999, according to the 2007 National Association of Lubricating Grease Manufacturers (NLGI) survey.

Asia Pacific grew the most, showing a 261% increase since 1999.

“Grease volume in the US and Canada is decreasing as auto and electronic manufacturing are moved to low labour-rate countries, including southeast Asia, India and Mexico,” Converso said.

“Asia has replaced North America as the largest manufacturer and will continue its growth over the next decade,” Converso said. “The benefit is low labour costs, lower raw material costs, less environmental restrictions and increased demand for consumer products in the same regions.”

Supply and demand issues in the US will lead to disproportional price increases, Converso said.

Global grease sales exceeded 307m gals/year (1.16bn litres) in 2007, according to NGLI data.

Major oil companies that manufacture grease include Citgo, Chevron, ExxonMobil, Petro Canada and Shell. Independent manufacturers include Battenfield, Chemtool, Fuchs, Jesco, Norlakes and Royal.

Specialty grease manufacturers include Chemtura, Dow Corning, DuPont, Kluber Lubrication and WF Nye.

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By: Heather McGuire Doyle
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