AFPM ’24: Lubricant additives may recover in 2024 after severe destocking – LANXESS exec

SAN ANTONIO (ICIS)–Lubricant additives demand may recover this year following major destocking in 2023, said the head of LANXESS’ business.

“What we hear from our customer end-use segments is that in most cases, destocking is over and inventories are at reasonably low levels. The general theme that’s playing out is that customers are manufacturing to the extent of what is potential real demand, and not restocking,” said Neelanjan Banerjee, senior vice president of Lubricant Additives at LANXESS.

ICIS interviewed Banerjee on the sidelines of the International Petrochemical Conference (IPC), hosted by the American Fuel & Petrochemical Manufacturers (AFPM).

“We saw that play out very strongly in Q1 in many areas, such as automotive engine oils, where there was the biggest collapse last year. So that’s been a decent comeback,” he added.

However, given the volatility from geopolitical tensions, high inflation and high interest rates impacting consumer behavior, how that is going to play out in the coming quarters has to be very closely watched, he pointed out.

One area of growth is in calcium sulfonate greases which are increasingly replacing lithium greases because of lithium’s extreme price volatility over the past two years tied to electric vehicles (EVs).

LANXESS’ calcium sulfonate greases are used in passenger vehicle, heavy duty vehicle and marine applications.

SURGE IN INDUSTRIAL LUBRICANTS
The company is also seeing higher demand for sustainable industrial oil additives that also offer high performance, he said.

“This is driving innovation in the industry by suppliers who have the ability to conduct R&D and offer the molecules that meet the highest safety standards – favorable HSC profile, low VOC emissions and low carbon footprint,” said Banerjee.

“We also expect there to be consolidation in the industry for players that cannot meet these requirements,” he added.

In the US, increased investment from the US Inflation Reduction Act (IRA), the CHIPS Act and the Bipartisan Infrastructure Law (BIL) has spurred increased demand for industrial lubricants, said the executive.

This includes additives and packages for metal-working fluids, hydraulic fluids, gear oils, compressor oils, greases, as well as increasing demand for formulated calcium sulfonate complex greases.

“As a result, we are increasing our resources dedicated to providing solutions to industrial customers and applications in the Americas,” including sales, technology and potentially laboratory support in the US, said Banerjee.

EV TRANSITION IMPACT
The EV transition is expected to happen but more slowly than initially anticipated in the US, with 16.3% of total US light vehicle sales being EVs in 2023 – up from 12.9% in 2022, he noted.

However, EVs comprised just 1.2% of the US car parc (number of vehicles on the road) in 2022, he added.

In the internal combustion engine (ICE) market, lubricant sales are primarily driven by the replenishment and maintenance market, and this continues to dominate, the executive pointed out.

EV fluids will more likely be filled one time for the life of the vehicle and primarily sold to OEMs, and it will be years before the impact of EV fluid volumes becomes significant, Banerjee said.

The industry is working to understand and develop specifications for a variety of fluids required by EVs such as driveline fluids, hybrid engine oils, specialty greases and immersion cooling fluids, and LANXESS has active solution development under way for all these EV fluids.

Regulations and legislation could drive EV adoption higher, but the trajectory is highly uncertain as automakers and consumers may not be ready, he said.

“I still feel ICE technology will be there for years to come… Regulations are a topic that has to play out with governments worldwide,” said Banerjee.

Challenges for the EV transition include price volatility in battery materials, retraining of the automotive workforce, and overall high prices for EVs, he noted.

“People were very excited about the possibilities, but the harsh reality today is that even with all the new regulations in play, the cars are getting heavier and more expensive,” said Banerjee.

“The world has to get that right – it’s not that easy,” he added.

COOLING FOR DATA CENTERS
An emerging growth end market is data centers which enable cloud, AI, autonomous driving and cryptocurrency mining capabilities.

“The lubricants industry has been busy positioning their basestocks as suitable immersion cooling fluids for both EVs and data centers,” said Banrjee, who noted that LANXESS has developed two families of cooling fluids based on synthetic basestocks and formulated with antioxidants, yellow metal inhibitors and antifoams.

“We believe a sizeable market will develop for these cooling fluids in the next few years,” he added.

Unlike in EVs, direct immersion cooling of data centers is being applied today.

LANXESS is developing both single-phase and two-phase immersion cooling solutions.

“Once you dunk a computer into a liquid, materials compatibility is a design requirement, and one key trend is also to move away from fluorinated hydrocarbon coolants due to PFAS health effects,” said Banerjee.

Interview article by Joseph Chang

Front page picture source: LANXESS  

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC took place on 24-26 March in San Antonio, Texas.