The New Year sees the world in a much better place, economically, than at the beginning of 2013.
Despite another turbulent 12 months, the Euro has not collapsed. China has continued growing at 7% and Japan has started to move forward. US GDP in 2013, floating on cheap money and quantitative easing, has provided the funds for strong growth which was close to 4% in the final quarter of 2013.
For cynics who complain, we should consider that during the 1930s' financial meltdown US GDP fell by 25% - an unimaginable figure for the world’s largest economy – but similar to the rates that now afflict Greece. Sooner, rather than later, the market will need to be weaned off the 'easy money'. Realistically, the US economy may slow slightly as a result.
The geopolitical situation is changing, boosted by - amongst other key elements - fracking, which has provided cheap fuel and transformed the energy scene and US industrial prospects along with it. TOTAL’s recent investment in the UK fracking industry is an indicator of what may be to come.
If Europe was able to adopt and implement similar fracking arrangements, the impact on currently uncompetitive refineries across Europe and the European chemical industry could also be transformative.
Meanwhile, part of the BRICS community is unravelling. Brazil and India have suffered unexpectedly lower growth. They are potentially being supplanted by the next 'Big Idea', the MINTs (Mexico, Indonesia, Nigeria and Turkey). However, even that acronym is looking shaky with Turkey already experiencing new economic challenges.
The PMI indices around the world are looking strong: Japan at 55% (46.5% - Jan 2013 China 51.2% - still positive but easing; Eurozone 52.7%, with even Italy at 53.3% (a 32 month high) up from the mid forties 12 months ago. Just France remains stuck in the doldrums at 47%, a seven month low.
Turning to vehicle sales, the UK and Chinese markets have been strongly positive - the UK surpassing its 2007 total. This is in sharp contrast to the Eurozone where sales have fallen for the last six years.
So, from all of these statistics, what can we predict for the coming year?
We are, finally, five years past the 2007/8 financial crisis and the world economies are recovering as Rheinhart-Rogoff research suggests they might. This is expected to continue. The Eurozone, despite previous comments and ongoing structural concerns, will survive; whilst the US economy is likely to cool somewhat but continue to grow even as the liquidity is reduced.
Car technology is set to progress, with turbo-based hybrids outperforming electric cars and building progressive market share because they don’t require the expensive re-charging infrastructure. They do, of course, still need clever, more efficient batteries.
On the downside – a Chinese banking crisis, another Eurozone financial fiasco, or another deep well disaster could put the world economy on the back foot again.
In the lubricants sector, legislation to tax European lubes further is likely to be narrowly avoided, thanks to concerted industry action, while global demand for lubricants will continue to grow along the regional lines predicted over the past year or so. There will be a difference in emphasis and the relentless pressure on specification and performance improvements will mean further revisions in formulations. More importantly, we are likely to see more non-compliant lubes producers being picked up by the various quality initiatives around the world - whether VLS in the UK, FQS in Germany or ATIEL's EQMS.
The digital world (which, for example, now accounts for 12% of the total UK economy through internet-related activities alone) will continue to create market opportunities. This is especially true for lubricants businesses as they learn more about how to adapt their systems to the mobile, cloud-based world in which we now find ourselves. New systems will be needed with greater integration and smarter interconnection.
All in all, it should be another challenging year as the global economy continues to move South and East. At OATS we are looking forward to celebrating our 30th Anniversary. We've come a long way from producing a simple recommendation book to sell more lubricants. To find out just how much more we offer now, contact us by e-mail or keep in touch through social media via Twitter @Oats_Ltd, Facebook and LinkedIn.
Happy New Year!
Sebastian Crawshaw
Chairman and Owner, OATS