Rise in auto sales, rapid industrialisation and shifting of the production hubs to India are the factors driving the consumption of lubricants in the country. Increase in regulatory pressure and usage of high-end equipment in production facilities is propelling demand for specialty lubricants.

 

The Government of India launched the ambitious Make in India initiative in September 2014 with an aim to make manufacturing a key engine for India’s economic growth. And to drive the economic engine of the country smoothly, lubricant sector will have to play a key role. 

 

Lubricants are used to reduce friction between the surfaces. Good lubricants possess the various characteristics like high boiling point, low freezing point, high resistance to oxidation, corrosion prevention, high viscosity index, thermal stability, hydraulic stability, and demulsibility.

 

Industry players are eyeing to gain market share by shifting their focus from volume growth to value growth. India, which is the third largest lubricant market globally in volume terms behind the US and China, is expected to continue its growth momentum in future.

 

Industrial lubricant, with over 54 per cent of the total market, is the largest segment in India. Power generation, chemicals, automotive and other manufacturing, railways, marine, and metals are the leading end-use industries. “With an increase in upgradation of the lubricant industry; it is all set to witness a change from volume approach to the value approach. The consumer today demands a more descriptive touch to every sector and is keen in the petroleum industry too. The lubricant sector is a lucrative business as it is slow paced but generates high returns in future,” according to a report in International Journal of Management and Applied Science.

 

The Indian lubricant industry is dominated by PSUs like HPCL, BPCL, and IOCL and by private companies like Shell, Castrol, Exxon Mobil, Gulf Petrochem, etc. Companies are investing in modernisation as the manufacturing sector gains momentum; thus prompting lubricant players to also gear up for expansion. 

 

Global scenario 

The global lubricants market size is expected to reach $166.25 billion by 2025, according to a report by Grand View Research Inc (GVR), expanding at a 3.8 per cent CAGR during 2017-2025. Increasing demand for a diverse, innovative grade of lubricants for industrial as well as automotive applications is expected to drive growth.

 

Stable base oil production across regions has stimulated feedstock security among blenders in the recent past. Moreover, recovering end-use industries are likely to drive sales of lubricating oil, which is slated to provide equilibrium to the supply-demand scenario.

 

In addition, high growth in the base oil market, rapid industrialisation, burgeoning population and urbanisation, and high growth in major end-use industries such as textiles, chemicals, food processing, and metalworking are some other factors driving industry growth.

 

“Industrial engine oils are being utilised in a wide array of applications owing to their exceptional inherent characteristics. These oils are designed to offset rising fuel and operating costs. They have a lower coefficient of friction, which helps in saving fuel and at the same time, keeps the engine clean for maximum combustion efficiency. These oils also help in keeping ports, piston, crankcase, and filters clean for a longer duration,” said the GVR report.

 

The adoption of bio-based lubricants in the global lubricants market is one of the latest trends followed by end-users and manufacturers. According to Technavio, “Vendors are manufacturing biodegradable lubricants. Compared with the petroleum-based lubricants, bio-based lubricants produce a cleaner, less toxic work environment for engine and hydraulic system workers. Bio-based lubricants also cost less over the product lifecycle owing to less maintenance, storage, and disposal requirements. These environment-friendly lubricants offer better safety due to higher flashpoints, constant viscosity, and less oil mist and vapor emissions.” Moreover, many vendors are focusing on bioaccumulation and eco-toxicity to reduce adverse impacts on the environment. These bio-based lubricants degrade gradually and, therefore, leave minimal traces in the environment.

 

“Apart from the emergence of bio-based lubricants, the growing automotive industry, the high growth of construction industry in APAC, and the rising need for technological upgrade are some other major aspects that are expected to boost the growth of the global lubricants market,” said a senior analyst at Technavio.

 

India: Lubes in a driver’s seat 

According to Mordor Intelligence report, the India lubricant market is expected to register a CAGR of 4.64 per cent during 2018-2023. The major factors driving the growth of the market are the increasing vehicular production along with the growing industrial sector.

 

“The major driver for the India lubricant market is the boost in demand from the automotive industry. The sales of new motor vehicles in the country have been on a consistent rise, majorly owing to the growing middle class incomes. The automotive production in India has also been on a rising path with yearly growth rates of over 6 per cent, thus, increasing the demand for engine oils and other lubricants employed in the automotive industry. Though, mineral oils hold the largest share among all the automotive lubricants used in the country, synthetic and semi-synthetic lubricants are expected to grow at a rapid pace during 2018-23,” added the Mordor Intelligence report.

 

Lubricants are majorly used in the industrial sector for the proper functioning of machines. They are also used in automobile for smooth functioning and longevity of engines and other components. Lubricants are available in liquid, semi-fluid, or solid state, and possess various characteristics, such as, high viscosity index, high level of thermal stability, low freezing point, and high boiling point, all of which help to reduce friction between surfaces of machine parts and the rate of wear, without compromising operational efficiency.

 

Industrial lubricants: A potential segment

There is the wide range of lubricants such as engine oil, gear oil, process oil, grease, general industrial oil and metalworking fluid that is used for different purposes. Among different types of lubricant segments, engine oil is most widely used, and it contributes the highest share in the market. On the other hand, the process oil segment is expected to register the highest growth rate in the near future.

 

Growing demand for the automotive industry, rapid industrialisation and shifting of the production hubs to India are the factors driving the consumption of lubricants in the country. “A great deal of demand growth for lubricants is expected from the construction and agriculture industries. Growing investments in the infrastructure sector and other strategic initiatives of the Government of India are expected to boost the construction sector in the country, which, in turn, is anticipated to boost the demand for the lubricants used in construction activities and other heavy equipment in India,” said the Mordor Intelligence report. 

 

Specialty in demand 

Rising in need for niche applications is bolstering the demand for specialty lubricants from across industries. Automotive sector is one of the leading consumers of specialty lubricants due to rising sales of passenger vehicles and increasing awareness among automobile manufacturers about the benefits of using specialty lubricants. 

 

Regulations, cutting across industries, are increasingly becoming stringent worldwide. Companies, which focus on innovation, environment and new technologies, are the once that are better equipped to handle these regulatory changes. Specialty lubricants help these companies to fulfill their regulatory obligations. 

 

Indian economy is growing at faster rate leading to rapid rise in demand for products across industries. While the country’s GDP is growing at 6-7 percent, the market for high-end products and technologies is growing at much faster pace than what these GPD numbers indicate. Most of the top global 500 companies either have their plants in India or are planning to open one in the country. 

 

Manufacturers in India are investing in state-of-the-art machineries to make them competitive not just in India but also globally. This, in turn, is leading to surge in demand for specialty products. The market for specialty lubricants may be a niche, but for a country having 1.3 billion inhabitants, this niche is big enough (compared to other countries) for specialty lubricants manufacturers to invest. India’s middle income population, the aspirational class, is growing at a fast-pace which is leading to rise in demand for premium, high-end products.  This will only lead to rise in consumption of specialty lubricants in the future.