PRAGUE – When it comes to lubricants, Middle Eastern markets have been resilientin the face of the regions political and social volatilities, giving marketers good growth prospects if they know their competition and what strategy to follow, an analyst said.
Iran,a 700-million-liter marketin 2011, is the regions biggest lubricants market, followed by Saudi Arabia, which consumed 360 million liters, and Iraq at 175 million liters, according to Steve King, director of SJK Marketing Services. Other Middle East countries such as United Arab Emirates, Yemen, Syria, Israel and Kuwait consumed between 50 million liters (Kuwait) and 70 million liters (Israel and UAE). Lebanon, Jordan, Oman, Qatar, Bahrain and Palestine consumed between 15 million liters (Palestine) and 37 million liters (Lebanon).
Irans market is characterized by demand for very low quality. It is quite an insulated market with very small involvement of the global lubricants majors, King told the ACI European Base Oils and Lubricants conference held here last month.
The Saudi Arabia lubes market added 60 million liters from 2009 to 2011, King said, primarily due to population growth, increases in car sales and some degree of industrial development. Iraq is still recovering from the war situation, and its lubricants market can be quite unpredictable.
Israel is the regions most sophisticated and most Europeanized market and consumes high quality products. Practices in Israel tend to be more Western, with drain intervals longer than the rest of the region, said King, who is based in Swindon, Wiltshire,U.K.
All these countries are expected to grow in the next five years at average rate of 2.5 percent annually, he noted. Saudi Arabia is expected to consume 407 million liters of lubricants by 2016, UAE is expected to grow to 87 million liters while Qatar is slated for demand growth of up to 27 million liters by 2016.
Qatars lubes demand is expected to grow further because of infrastructure development that will be necessary to host the 2022 soccer World Cup championship, according to SJK.
Middle East countries such as Saudi Arabia, UAE and Lebanon are dominated by passenger car motor oils, while two, Yemen and Jordan, are dominated by heavy duty motor oils. This could be because a lot of monograde oils are classed as HDMO and purchased as a cheap alternative for use in passenger car engines, King said.
Saudi Arabia has fairly even balance between consumption of PCMO (175 million tons) and HDMO (165 million tons). This country is huge and people move a lot by cars, but also commercial goods are transported by trucks because there is no railway system.
SJK pointed to three countries as representative of the quality of PCMO consumed in the region. Yemen has lowest share of high quality lubricants-only 2 percent of the total consumed product mix are synthetics and semi-synthetics. The restis mineral multi- andmonograde oils. The share of synthetics and semi-synthetics in Saudi Arabia is little bit higher at 5 percent.
In contrast, Lebanon has always followed the trends in Europe and the United States, and around 20 percent of the lubricants consumed in the country are premium quality products, King said, adding that compared to the rest of the Middle East, Lebanon has quite a developed product range of lubricants. In the HDMO product mix, the Middle East consumes very little premium lubes, with monogrades holding the biggest market share. In UAE and Saudi Arabia, for example, synthetic HDMOs have a 1 and 2 percent share, respectively,ofthe total product mix, he said.
The consultancy found that the Middle East is a regional market with a good growth rate of 1 to 4 percent annually, depending on the country. The growth rate is driven by three major factors,King said.
First is high population growth, which leads to increased vehicle sales and Gross Domestic Product. There also is ongoing industrialization of Saudi Arabia, King said, adding that the country has built six major new industrial cities.
The second trend is an upward shift in the quality of products. Very slowly, but it is a trend that is taking place. However, another thing that everyone should be aware of is that this region is notorious for counterfeit products. There are many unscrupulous people blending products and selling them either as low quality products or counterfeiting other world brands, King warned.
The third major trend driving the Middle East lubricants market is that oil and puncture shops are still very important here, and themarket isgenerallydo-it-for-me,according to SJK. People here dont really do do-it-yourself oil changes. Quick lubes are also developing very well, and many competitors are opening fast lube chains, King said.
Competition in the region is very intense, he said. Typically the competitors are the national oil companies and local companies that dominate the market. Total, Fuchs and Castrol are some of the internationals that have their share in these markets.
Petromin Lubricating Oil Co. is Saudi Arabia’s national leader, while Shell is a major international player there.Abu Dhabi National Oil Co. is a market leader in UAE. In Yemen Falcon and Sonic are popular lube brands, while in Israel it is Sonol and Delec.