Global demand for synthetic base stocks is predicted to increase at a compound annual rate of roughly 6 percent through 2022, due to increasing demand for higher quality finished lubes, an industry consultant said last week. Kline & Co. predicts the rate of growth will be fastest in the Asia-Pacific region.
Although synthetic base stocks make up a small percentage – around 6 percent or 7 percent – of the global finished lubricant industry, it is an attractive segment because of the tight value and growth, said Sharbel Luzuriaga, project manager atKline. The current global base stocks business is a buyers market, he told Lube Report in response to follow-up questions.
Kline projects Asia-Pacific demand for API Group III base oils to jump at a compound annual rate of approximately 9 percent over the next four years. Polyalphaolefin demand in the region is expected to increase at a compound annual rate of about 6 percent.
Synthetic base stock appetite is growing around the world because original equipment manufacturers and end users of finished lubricants are raising the performance bar for lubes in many applications. Through 2022, global demand for finished synthetic lubricants is expected to grow at a compound annual rate of 6 percent, while consumption of semi-synthetic lubes is predicted to increase roughly 5 percent per year. Kline forecasts demand for conventional lubes is projected to fall around 1 percent annually.
The pace of growth varies for different types of synthetic base stocks because some are favored over others in certain applications, Luzuriaga said.
One of the key factors … is the competition between different base stocks, driven by their performance, price, approval, endorsement and availability, Luzuriaga said.
Globally, Group III will see the strongest percentage increase in demand due to increased availability and pricing advantages over other synthetic base stock options. Kline distinguished between Group III+ stocks, an informal category of Group III oils with viscosity index of 130 or more, and Group III oils, which are defined as having a viscosity index of at least 120.
Group III+ volumes have ballooned the past decade with the opening of three plants – the Pearl gas-to-liquids joint venture betweenShellandQatar Petroleumin Ras Laffan, Qatar; a joint venture betweenSK LubricantsandPertaminain Dumai, Indonesia; andAdnocsplant in Abu Dhabi, United Arab Emirates – which together account for more than 90 percent of global Group III+ capacity, or roughly 2 million metric tons per year.
These oils have begun to compete against other Group III oils, for which global capacity is approximately 5 million t/y, Luzuriaga said. PAO capacity is around 1 million t/y, though Luzuriaga emphasized that this does not represent the volume actually produced.
PAO capacity is still recovering from the damage that Hurricane Harvey inflicted on the market last year. Somehow the disruption of PAO supply due to [Hurricane] Harvey harmed the already existing lack of confidence on PAO security of supply, Luzuriaga noted. Manufacturers operating in the Gulf area are actively developing contingency plans and taking preemptive actions to minimize future supply disruptions, and improving the market perception in terms of supply reliability.
Group III and Group III+ oils are used primarily in passenger car motor oils, Luzuriaga explained, while globally the largest portion of PAOs gets used in industrial lubricant applications. Nevertheless, the amount of Group III used in industrial lubes – 400,000 t/y – still exceeds the 200,000 t/y of PAO used due to the fact that Group III supply is much greater.
It is anticipated that consumption of high-viscosity PAOs will grow due to growth in industrial applications, Luzuriaga told attendees, adding, High-viscosity applications are an area of focus for PAO suppliers.
Group III is also the synthetic base stock most used in heavy-duty motor oils, with 300,000 t/y, significantly higher than 150,000 t/y and 100,000 t/y for Group III+ and PAO, respectively.
One area that Group III base oils do not rule is passenger car motor oil applications. Group III demand for that category sits at roughly 700,000 t/y, compared to 750,000 t/y for Group III+ and 200,000 t/y for PAO.
Including its joint ventures in South Korea, Indonesia and Spain, SK is the largest supplier of Group III stocks, holding nearly half of the worlds capacity for that category.S-OilandNestefollow with roughly 20 percent each.
Shell has 50 percent of global Group III+ capacity, followed by Adnoc, with approximately 25 percent, and Pertamina, with around 20 percent.
Roughly 90 percent of all PAO supply is held by four players:ExxonMobil,Ineos,Chevron Phillips ChemicalandLanxess.