A decline in finished lubes demand between 2011 to 2012 caused base oil market to contract, according to analysts Kline.
At the recent ICIS Asia Base Oils Conference, Kline & Co’s Li Wang claimed that waning demand from China caused larger shifts in the global base oils market. Although the “picture in China is still hazy”, Chinese demand may have flatlined, or at least fallen well below the 5% growth analysts are used to seeing in the growing economy.
Milind Phadke, energy practice director for the American consulting firm, believes the government's cooling of the housing and construction markets has led to a contraction in lubes demands in the first 9 months of 2012, compared with 2011 levels.
This may lead to Asia, which previously drove global lubes growth, to lose its position as API Group III base oil supplier to the world within the next ten years. As China slows down, claims Phadke, the whole region slows down.
Phadke believes that by 2022, Asia will account for just one-third of global Group II supply, with Europe and the Middle East supplying roughly the same amount. South Africa’s Sasol is also slated to become a major Group III supplier.
Global demand for finished lubricants in 2012 stood at 39m tons, a 0.9% growth on 2011 levels. Around 12m tons of new Group II and III supply will be added over the next 10 years as Asia continues to slow, while Group I supply may reduce by 4 to 5m tons as demand for high quality, high performance lubes increases.