Message from the President
The first quarter of 2017 has been marked by the 21stICIS World Base Oils and Lubricants Conference in London where representativesfrom base oils and lubricants companies gathered to discuss the latestdevelopments impacting the industry.
A lot of focus was on base stocks and in particular on theimpact of low crude oil price levels on base oil capacity outlook and newinvestments. According to Steve Ames, the pace of investments in new base oilplants and expansions should slow down in the coming years, partly as aconsequence of the current supply surplus, but mostly due to oil companiesreducing expenditures because of the protracted lower crude oil prices.However, the projects that are at an advanced stage will be completed, adding acombined 4 million tpa of API Group II and III capacity by 2021, which will furtherexacerbate the current oversupply that he estimated at 5 million tpa. Thesupply unbalance will be compensated by closures – with 6 million tpa capacitylikely to disappear over the coming 5 years, according to Ames’ estimates. Theproduction rationalization should impact primarily Group I plants.
The first provisional figures published by lubricantscompanies for the financial year 2016 seem to indicate that 2016 was a rather positiveyear for the industry, even if the global demand for base oils and finishedlubricants seemed to have been flat in 2016 compared to 2015. In mature marketssuch as the US and Europe, demand actually declined slightly due to ongoingefforts to increase performance and efficiency leading to a lower lubricantsconsumption. While slight growth in demand in emerging economies balanced theselosses, the overall market remained flat due to lower than expected rates ofexpansion in countries like China, India and Russia.
With the mature markets continuing on the trend towards increasedperformance and lubrication efficiency and therefore declining lubricant demand,the demand outlook for 2017 will be dictated by the economic outlook ofemerging economies, with – once again – the attention being focused on marketslike China and India, and on the long awaited recovery from recession ofBrazil.
In Europe during 2017 sustainability will be a hot topicon the agenda of many companies, since in the EU companies with more than 500employees will have to prepare an annual sustainability report, starting on January1, 2017 – possibly a first step of a process that might eventually also encompasssmaller companies. Understanding how to develop sustainability standards for the Europeanlubricant industry will therefore be of paramount importance. This willcertainly pose a challenge to our industry, but will as well offeropportunities for development and innovation.
Innovation and sustainability will be the focusof the UEIL yearly congress that will take place on October 25-27 2017 in thebeautiful city of Bologna in Italy and that will represent an excellentoccasion to discuss how our industry can be innovative and forward looking.