15 February 2013 09:51 [Source: ICB]
The Latin American base oils market is emerging from a decade of tranquillity, re-defining itself as a vital player.
With burgeoning supply dominating several of the key global base oil production regions, and with weak lubricant demand in Europe and China showing little sign of improving in 2013, suppliers are increasingly interested in exporting to Latin America.
Sao Paulo traffic: expect more cars soon
This is largely due to changes in the automotive market affecting base oil requirements. Brazil's vehicle landscape is changing as more people move into the middle class, enabling them not only to purchase more cars, but more newer cars.
About 30% of Brazil's vehicle fleet is now less than three years old. Original equipment manufacturers (OEMs) are recommending SAE 5W motor oil for the new cars versus SAE 10W, which was the typical choice just five to 10 years ago, according to speakers at the ICIS Pan-American Base Oils conference held in December 2012 in New York, US.
This means an increased need for the quality base oils and additive packages that are used to make higher performance lubricants.
The move to more modern vehicles is also changing the type of engine in the automotive fleet. There is, for instance, more use of vehicles using flex fuels and alternative fuel types.
In Brazil nearly 75% of new vehicles are designed for up to 100% ethanol usage.
These technologies are more sensitive to lubricant quality.
New legislation for improved fuel economy in Brazil will also have significant impact on engine design and hardware choices, meaning that higher quality lubricants will be needed.
The average fuel economy for gasoline powered cars in Brazil is currently around 14km/litre, while the proposed average for 2017 is 17.26 km/litre.
For ethanol-powered cars, the average fuel economy is 9.71km/litre, with the proposed average for 2017 set at 11.96km/litre
OEMs that meet these requirements will receive tax incentives from the Brazilian government. As a result, finished lubricant makers in the region will increasingly use more Group II and Group II+ base oils and synthetic lubricants to meet the demands of the newer cars, fuel economy and legislation standards.
Expectations across the Latin American region are for further growth, with many improvements on the horizon in transportation, logistics and infrastructure.
Fostered by good expectations and led by sustained economic growth in Mexico, Brazil and others countries in the region, Latin America's base stock demand continues to capture increasing interest from the global base oil market.
MEXICO: MORE CAR PRODUCTION PLANNED
Mexico is the second-largest economy in Latin America and ranks eighth in the world as a producer of light automotives, with an output in 2011 of 2.55m units. In heavy-duty vehicle production, Mexico ranks sixth on a global basis, with 136,678 units.
There are 19 carmakers in Mexico, with plants located in 15 states of the country. New investments by companies such as Mazda, Honda, Nissan and Volkswagen are planned for 2013.
Mexico remains primarily a Group I base oil market. But increasing quantities of Group II and II+ base stock are finding their way into the country as prices in the US have fallen over the second half of 2012.
The top players in the Mexican lubricants market include ExxonMobil, Shell affiliates and Chevron from the US, as well as Raloy, Roshfrans and Lubral of Mexico. In terms of base oil production, Petroleos Mexicanos (Pemex) is the single base stock producer, with 6,000 bbl/day Group I capacity at its Salamanca location. The company is planning to increase its base oil capacity in 2013.
While Pemex is the only base oil producer in Mexico, South American production includes mainly Petrobras in Brazil, PDVSA in Venezuela and Ecopetrol in Colombia.
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