Kline & Co. estimates global marine lubricant demand in 2013 at 2.1 million tons, which is almost the same as 2012 demand. Asia, with a 53 percent share, is the largest consuming region, followed by Europe (including Western and Eastern Europe, Russia and Turkey) with 22 percent and North America with 17 percent. The overall market is not expected to grow much; however, Asian demand is expected to rise because expanding economies in the region will increase their seaborne trade, leading to higher lubricant consumption.

Slow steaming has become a standard operating practice in the shipping industry and is expected to continue in the future because it helps companies reduce fuel cost. However, it adversely affects the overall demand for marine lubricants while at the same time increasing the demand for lubricants with higher base number.

The biggest shift in the marine lubricants industry is expected to be a move away from one universal cylinder oil to cylinder oils with different base numbers for specific applications. These shifts will be more pronounced in emission control areas (ECAs) around Europe and the United States.

In ECAs, allowable fuel sulfur content will drop to 0.1 percent in January 2015. Shipping companies can adopt any of three strategies to meet the sulfur emission norms – low sulfur fuels, alternative fuels like liquefied natural gas and scrubbers – and that will determine the direction of the marine lubricants industry in this regard.

In the immediate future, low-sulfur fuels seem to be the only option due to challenges with the other alternatives. Consequently, the demand for low base number (15-20) lubricants in ECAs will increase. The formation of the Trident Alliance, aimed at improving the compliance to sulfur norms, will also aid in expanding the market for low base number lubricants, mainly in the European ECA.

However, when the new global sulfur requirements come into effect in either 2020 or 2025, the supply of low-sulfur fuels in sufficient quantities could become an issue, increasing the use of scrubbers and LNG. In such a scenario, shipping companies will choose from among the three strategies, or a combination, depending on cost-effectiveness.

Kline expects older ships to opt for scrubbers and new builds to opt for a combination of scrubbers and dual-fuel engines that can use both LNG and fuel oil. Dual-fuel ships can use LNG in the Middle East, where it is readily available, and fuel oil along with scrubbers in Europe to meet emission norms.

Increased use of scrubbers will push the market toward mid-base-number (50-70) lubricants, and the use of LNG will require lubricants compatible with it. This means lubricant suppliers will have to stock these lubricants at various ports, thereby increasing logistical challenges.

At the same time, cold corrosion has become a major problem for engines designed to meet Tier II nitrogen oxide emission norms that have led to the emergence of super-high-base number (100 BN) cylinder oil. Operating temperatures of the cylinder in engines designed to meet these norms have dropped significantly, which could result in sulfuric acid deposits on liner walls. Neutralizing the acid requires 100 BN oil.

Cold corrosion is also caused by slow steaming, which helps reduce fuel consumption. Going forward, this mode of operation is expected to become standard, increasing the demand for 100 BN cylinder oils.

Emission norms stipulated by the shipping industry have had a substantial impact on the marine lubricants industry in the past. Therefore, the expectation is that the norms to be implemented over the next few years will play a major role in shaping the direction of the marine lubricants industry in the future.

New emission norms are expected to move the marine lubricants industry further toward application-specific cylinder oils. Kline expects the market to offer oils in three base number ranges: low BN (15-20), mid BN (50-70) and high BN (80-100). The use of LNG is also expected to increase in the future; therefore, lubricants compatible with it will also be needed.

The global demand for marine lubricants bottomed out in 2013 and will start to rebound in 2014. Demand growth between 2016 and 2018 will be slower as the industry deals with the effects of increased slow steaming, the introduction of bigger and more efficient ships, scrapping of old and inefficient ships and alliances among shipping companies to optimize operations. Beyond 2018, growth will be strongly driven by growth in trade. ο

Kunal Mahajan is Project Manager, Chemicals &Energy at Kline & Co. and can be reached at Kunal_Mahajan@klinegroup.com.