Lubricant demand in Brazil jumped to 399,000 metric tons for the first four months of this year, a 5 percent increase compared to the same period of 2018. The results buoyed expectations for the market, which swelled slightly in 2018 after four years of big declines.
The size of the first quadrimester increase was unexpected but was in line with increases in sales of automobiles, auto parts and agricultural machinery.
The results came from a study of data from various sources conducted by Lubes em Foco magazine, and presented by the author of this article, Lubes em Foco Editor Pedro Nelson Belmiro, at last weeks Meet the Market South America Conference in Rio de Janeiro. The nations automobile market made strong gains in the first four months, as sales increased 12 percent compared with the same period of 2018, while the auto parts segment grew 8.6 percent.
February was a very good month for commerce and industry in Brazil because the Carnival holidays that normally impact production throughout the country happened in early March instead of February. This meant Brazil had a February with 20 working days for the first time in five years.
The Brazilian lubricants market recovered in 2018, growing 1.9 percent in sales volume, after shrinking a cumulative 16.2 percent the previous four years.
Exports also contributed for the strong result, reaching a record level of 22,800 metric tons for the first four months. Although a small volume in the context of the total market, that export figure was more than double the average of recent decades.
There were minor changes in market share of leading suppliers during the January through April period, with Petrobras‘ BR Distribuidora retaking the top spot at 20.5 percent of total sales volume and Iconic, a joint venture between Ipiranga and Chevron, taking second place with 20 percent. BR Distribuidora was the market leader for years until Iconic moved ahead in 2018. The combined share of small companies increased during the first four months, reaching 23.6 percent.
The Southeast region continues to be the largest for lubricant sales, mainly because it includes the states of Sao Paulo and Rio de Janeiro.
Brazil’s base oil output is not keeping up with the growth of finished lubes. The country has only three refineries that produce base oils, and one of them just produces naphthenic products. These refineries now deliver 43 percent of the country’s base stocks need, and only produce API Group I oils. Rerefineries supply 21 percent of demand, and imports make up 36 percent.
Many presentations at the conference highlighted the reality that Group II and III, along with other synthetic base stocks, will become the only options for formulating new engine oils, and Group I will be used for industrial applications. Brazil will likely continue to be a base stock importer for many years ahead because Petrobras has not announced any plans to invest in its refineries. Any other supplier that might enter the market would need a long time to start producing base stocks.
The main supplier to the Brazilian base stocks market continues to be the United States, which accounted for 66.2 percent of the total 169,000 tons imported, followed by Malaysia and South Korea.
Despite the positive Brazilian lubricants market performance in the first quardrimester of 2019, oil companies remain concerned about the country’s economy and a crisis buffeting the automobile market in Argentina, which is the greatest importer of lubricants from Brazil. Everyone is anxious about the outcome of the pension reform that will be voted on probably next month by the Brazilian Congress. After that, it will be easier to make a forecast for the Brazilian lubricant market.
Pedro Nelson Belmiro, based in Rio de Janeiro, Brazil, is editor of Lubes em Foco.