Mood matters! At the start of 2014 the world seemed set-fair for a steady period of recovery. Just one month later and the situation appears very different. Financial crises have emerged again - Argentina is in trouble once more, the BRICS are in disarray, the Syrian civil war continues unabated, US growth is slower than expected. Which raises the question: Is this really serious or just a short-term wobble, like the variations in the jet stream?
If the update to the IMF's World Economic Outlook (WEO) is anything to go by, the long-term outlook is positive. The organisation predicted global economic growth of 3.7% this year, encouragingly 0.1 of a percentage point higher than its October projections, with further encouragement for 2015 at 3.9% growth.
To give this some regional context, India is forecast to grow at 4.9%, China at over 7%, the US is set to improve by between 2.8% and 3.2% which would be the fastest since 2005. Even the Eurozone is expected to be positive, albeit not at the level of the US, with the only major negative performer likely to be Japan, whose rate growth has slowed by more than 1% since the last Quarter of 2013.
This growth position is a far cry from four or five years ago when the world’s biggest economies were leading the retreat. The prediction of solid growth from the major economies should help lubricants producers absorb the challenges set by the "risky five", as the BRICS have recently been referred to.
Overall PMI (Purchasing Managers index) is still positive too. Economically, this looks reasonably optimistic. As the US Marketing VP of Ford stated: “after the weather effect we expect this to return to trend and the fundamentals still look solid.”
In the longer term the big issues of geo-political energy balance and the impact on the costs of manufacturing will take time to play out. Fracking may have transformed the US (for now) – but how long will it last? One of the more interesting side effects has been the collapse of gas prices, leading to severe write-downs by several of the oil majors – who showed a mixed bag of 2013 results - and increasingly a tightening on capital expenditures. The mining industry has reached a similar crossroads and is also reigning-back on capex. This suggests that growth may be patchy and cautious, from a lubes industry perspective.
All of these elements point to the continued need to further improve engine efficiency and lubricants performance. No change there. However, the targets to be met, specification requirements and cycle of change continues - as does the complexity of those recommendations. The need to provide mechanisms for handling increasingly complex data sets (in one case, 27 possible quality/viscosity combinations for a single excavator engine) is a serious challenge for the the lubricants industry. This is particularly significant at a time when producers are trying to deliver improved levels of performance, at lower cost and with "simpler” ranges, but still taking local variations into account.
This industry complexity has led to OATS investing unprecedented levels of resource and effort to develop the sophisticated and flexible systems for providing Integrated Global Lubricant Data Solutions. These are close to release and we look forward to briefing you personally on these innovations in the near future.
In the meantime, we watch and wait and continue to monitor information from around the world. To keep in touch with the latest news, or to find out more about OATS products and services, simply contact us by e-mail or follow our updates on social media via Twitter @Oats_Ltd, Facebook and LinkedIn.
Sebastian Crawshaw
Chairman, OATS