Majors will benefit from regional growth, but will face strong local competition.
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Lubes growth fuelled by China Image: Sinopec |
A combination of cheap base oil stocks and strong auto sector growth makes the Asia Pacific a highly lucrative investment for lubes producers.
A recent report from Micro Market Monitor, stated the value of the market could increase to $83bn by 2020 from $70.5bn in 2015, powered by a meteoric rise in industrial and auto sector expansion.
Lubricants majors such as Castrol and Gulf Oil stand to benefit significantly from this growth.
With strong brand recognition and solid distributor relationships, Castrol is able to maintain prices above competitors' products. In India, for example, it has a distribution network of some 105,000 dealers, compared to 58,000 at Gulf Oil.
Despite these factors, the major is seeing market share eroded from smaller players like HP Lubes and Tide Water, who are taking advantage of low cost base oil stocks and strong local knowledge to tempt dealers away from the more costly Castrol products.
In 2014, the mineral oil segment accounted for 75% of the APAC lubes market. China dominated the region with 63.1% share during the same period, followed by Japan. 2016 is likely to see the rise of smaller, regional players in key ASEAN growth regions like Indonesia and the Philippines.