Group II base oil production to grow amid flat lubricant demand – exec

05 December 2013 15:32 Source:ICIS News

JERSEY CITY, New Jersey (ICIS)--Amid planned substantial growth in global base oil production in the coming years, worldwide demand for lubricants will only grow by 0.1% by 2018, an industry consultant said on Thursday.

Some 11.4m tonnes of base oil capacity is set to come on line by 2018 due mostly to 9m tonnes of new project capacity, said Stephen Ames, managing director of SBA Consulting. He made his comments during a presentation of the ninth ICIS Pan-American Base Oils & Lubricants Conference.

Lubricant demand through 2018 is set to grow by 0.9% in Asia and 0.7% in South America, but that uptick will be basically offset by a 1.2% drop in demand in Europe and 0.7% fall in North America, Ames said.

Most of the capacity additions are in the Group II base oil realm – about 10m tonnes, he said.

Directly affected by the surge in Group II production will be Group I, which is being scaled down in global production due to what Ames called a “technology paradox” – it costs less to produce the higher-quality Group II’s than Group I’s.

Also factoring in is Group II’s “one-way fungibility”, he said, as most Group II’s can be used in place on Group I’s but not vice versa.

“There is little technical demand for Group I that cannot be fully satisfied by Group II,” Ames said.

Plants producing Group I’s will be challenged in the coming years, he added.

“We will see many [Group I] plant closures and/or many plants operating at reduced utilisation,” he said.

The ICIS Pan-American Base Oils & Lubricants Conference continues through Friday.

By Jeremy Pafford