Future of Esters market reflects demand for high quality base oils

A growth in esters and higher quality base oils could mean an optimistic outlook for the lubes industry.

Shell refinery at dusk

A bright future for Group III? Image: James Dalsa

A recent report from Grand View Research stated that rising demand from the auto and aerospace industries was certainly a key stimulus in the growth of synthetic ester lubricants.  But these were only the tip of the oil well.

In fact, heavy machinery manufacturers hydraulics and other lubes - such as compressor oils - were also driving up demand, particularly in the North American market, for higher performance products. While the US is set to grow further to 2020, according to the report, the Asia Pacific market is set to grow "significantly" as the American and European markets become saturated.

This is also potentially good news for the base oil producers, with research from analysts Transparency stating that demand is estimated to reach almost 40,000 kilo tons in 2020, although the financial value is estimated to fall by around $4bn by 2020.  While the research predicts a drop in Group I oils, in favour of the higher-performing Groups II and III (led by the automotive industry the global demise of Group I is still some way off, as demand for some Group I grades, such as Bright Stock are predicted to rise and Group I is set to remain dominant over the next five years.

That said, the move away from Group I seems to be gathering momentum - particularly in China and Africa. 

ICIS expects demand for Group II oils in North China will rise as the closing of Sinopec's 300,000 tonnes-per-year Beijing Yanshan facility strangulates supply. Sinopec may choose to up production at its Shanghai and Maoming plants to compensate for the closure, especially as the price of importing Group I oils from Russia remains high.

However, Porsche's largest car dealer in China, Jebsen Group, is investing $40m into a lube oil facility in a bid to tap a growing market for high quality lubes. The new facility will include a 16,000 tonnes-per-year base oil refining plant and a 35,000 tonnes-per-year lubricating oil blending plant, using Group II/II+ oils.

Meanwhile in Africa, Group I also appears to be falling out of favour according to reports from the ICIS Africa Base Oils and Lubricants Conference. While Group I still dominates local markets, according to the Lube Report coverage, the increasing scarcity of the base oil - which now has to be imported to meet demand - is a major factor in key African nations turning to Group II oils and beyond. Again the automotive sector is the greatest influence, particularly with a thriving South African consumer market and Nigeria's involvement in auto manufacturing.