October's UEIL Conference provided plenty of food for thought in relation to the economy, lubes production and the developments in lubes technology, in particular as a result of developments in motorsport.
Kline's Miland Phadke drew attention to the fact that the Lubricants Industry has now almost returned to 2007 levels. But the shape is different. AsiaPacific's market share is up from 34% to 43% while Europe has slipped to 17%, not only an indicator of the rise in demand for high-performance lubes in a fast-growing consumer environment, but also a clear demonstration of the impact of Europe's recent economic reversals.
Although the European “crisis” seems to have been alleviated, at least for now, the structural problems of non-convergence continue and are delaying considerably overall recovery. Corporate earnings have proved weak and sales from the likes of Volvo and Electrolux have missed sales targets. As a response, a surprise cut in interest rates has been announced to avoid the economy stalling.
Despite these travails, Jurgen Holmquist (formerly one of the key EC Director Generals) forsees a “dramatic” - or perhaps more of a significant - recovery in the next 10 years as the sophisticated European economy finally recovers. It still looks like being a long wait, especially in the weaker peripheral EU countries.
Other global trends have been pulling in different directions. The US (despite the government “shutdown”) has generally continued to grow, with GDP continuing to progress. Petroleum exports are accelerating and refineries are busy, although profitability is being hit by reduced margins, for the likes of ExxonMobil, with most of the majors reporting lower earnings in Q3. Having divested itself of its refining operations, ConocoPhillips was one of the few to show improved figures.
The picture, particularly for the US refiners, is further clouded by the current excess capacity in Europe which, in turn, is subject to competition from new entrants in the Middle East. Q8's conference presentation on the significant expansion of its blending facilities in Antwerp, risks similar over-capacity to that we are seeing from the European refiners.
A bright star in the lubricant industry's sky is motorsport and, in particular, Formula 1. The UEIL conference was treated to an excellent presentation by F1 sponsorship and marketing Guru, Mark Gallagher. In describing how F1 has been reshaped as the market for sponsorship changed, he made the point that F1 is as much about super-fast engineering development, data acquisition and analysis techniques as it is about super-fast cars.
It was reassuring to be told that much of this engineering work, and the major performance improvements, have been delivered by the lubricants suppliers to the teams. Mark also highlighted a dual turbocharger solution that is being applied to recharge the battery, which could transform the distance electric road cars will be able to travel without having to stop for a boost. The technology provides a very plausible solution to the internal combustion engine-to-electric transition, avoiding the infrastructure costs of installing recharging points. A challenge for electric car enthusiasts: good news for lubes producers; perhaps less so for the battery manufacturers.
As ever, we would always want to hear your feedback on articles in the Bulletin. You can contact us by e-mail or keep in touch through social media via Twitter @Oats_Ltd, Facebook and LinkedIn, where we will also be keeping you up to date with new articles that appear in the Lubes Resource Centre on a daily or weekly basis.
Sebastian Crawshaw
Chairman and Owner, OATS