Independent lubricant blenders entered the ASEAN marketplace just two decades ago, and today they number over 100. Total annual demand for lubricants in this 10-country Southeast Asian market is estimated at 2.2 million metric tons (2.4 million U.S. short tons), and nearly a third of this was supplied by independent blenders and marketers in 2001. Independents are reshaping the ASEAN marketplace, Dr. Ho Leng Woon, chairman and managing director of AP Oil International Ltd., told the 8th Annual Fuels & Lubes Asia Conference in Singapore on Jan. 30.
With a total population of 500 million and a growing appetite for lubricants, the 10 countries that make up the Association of Southeast Asian Nations include three open markets that allow free import of lubricants and base oils (Singapore, Malaysia and Brunei) and seven protected markets. The protected markets (Indonesia, Vietnam, Thailand, the Philippines, Myanmar, Laos and Cambodia) impose high tariffs on finished lubes and base oils. The open markets, Ho said, are generally dominated by multinational major oil companies, while the protected markets are usually controlled by their national oil companies.
Fifty-two of the regions independent blending plants have annual capacities greater than 2,000 metric tons each, Ho calculated. Agents and distributors import various brands of lubricants into individual countries for local consumption, said Ho. One can easily see from 30 to 50 brands of imported lubricants in any single country.
Independent blenders and marketers together have from 12 percent to 45 percent of the lubricant market in individual countries, with a regionwide total of about 30 percent of the market.
Estimated Market Shares of Independent Lubricant Blenders and Marketers, 2001
| Country* |
Independent Blenders % |
Independent Marketers % |
Total Market Share of Independents % |
| Thailand (15) |
37 |
8 |
45 |
| Myanmar (0) |
0 |
35 |
35 |
| Indonesia (4) |
4 |
28 |
32 |
| Vietnam (6) |
30 |
2 |
32 |
| Philippines (13) |
26 |
5 |
31 |
| Cambodia (0) |
2 |
25 |
27 |
| Laos (0) |
0 |
25 |
25 |
| Malaysia (7) |
8 |
10 |
18 |
| Brunei (0) |
0 |
15 |
15 |
| Singapore (7) |
5 |
7 |
12 |
In ASEAN countries, independent blenders and marketers have firmly established niche positions, built on close bonding with their customers. Such bonding and intimacy have been extended from business to personal levels, Ho noted, forming a lasting market niche that cannot be broken into easily … by industry heavyweights or other independents.
Many industrial equipment and heavy machinery suppliers also become lubricant importers and sometimes become blenders, and piggyback their specialty lubricants through their established distribution channels, Ho said. Toll blending, contract manufacturing, and supply chain services for majors and OEMs are other activities for independent blenders.
Despite the independents obvious success in penetrating the market, they face critical challenges. Having experienced the bitter and the sweet as an independent blender, said Ho, I have observed the major challenges ahead.
These challenges will be familiar to independents worldwide: base oil supply problems and price fluctuations, lubricant quality issues, and competitive markets with low profit margins.
There are seven base oil refineries in ASEAN countries, said Ho: three in Singapore, two in Thailand, and one each in Indonesia and the Philippines. Vietnam, Myanmar and Malaysia are totally dependent on imported base oils, and base oil output in Thailand, Indonesia and the Philippines is inadequate to meet domestic demand.
ASEAN base oil markets have traditionally been dominated by ExxonMobil and Shell, said Ho. These super-majors seem to be interested in big accounts, such as multinationals or larger independent blenders. Smaller blenders will have to depend on traders and larger independents for their base stock supply. Problems of shortage are common in periods of tight supply.
The price of base oils spiraled [up] by more than 15 percent in the first half of 2001, and supplies were tight from both ExxonMobil and Shell, said Ho. Small blenders and marketers faced great difficulty even after they got their supply, as they could not pass on the raw material cost increases … immediately. The price movements of the lubricant market are set by the industry heavyweights.
On the other hand, the plummeting of base oil prices in January 2002 also caught many independents blenders unprepared. Those who kept large stocks in December 2001 are likely to suffer.
Lubricant quality is a historic challenge in ASEAN countries, and many small blenders lag behind in quality management practices, said Ho.
So-called lubricants churned out by backyard operators are usually of inferior quality, with the majority of them … simply mixtures of straight base oils and other mineral oils of unknown quality, said Ho. He estimated that more than 15 percent of all lubricants marketed in Malaysia, Indonesia, Myanmar, Thailand, Cambodia and Laos are straight oils without additives.
Another problem in the technical area, Ho continued, is that small independent blenders hardly draw attention from additive suppliers. It seems that their volumes do not justify such services, but this makes it more difficult for small blenders to upgrade the quality of their products.
The lubricant-consuming public generally lacks knowledge about lubricants, Ho said, further undermining the market for higher-quality products. The dilemma is that low quality oils are usually marketed at a very competitive price with little profit margin. Tackling quality issues of lubricants would definitely have a positive impact on the business environment of small independents.
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