It’s Not Business as Usual When Selling Base Oil and Additives to Independent Lubricant Manufacturers  

Change spells opportunities for suppliers truly interested in the business of independents   

METUCHEN, NJ May 14, 2002 – According to a new report published by Petroleum Trends International, Inc. (PetroTrends), independent lubricant manufacturers account for 27% of the nearly 3 billion gallons of lubricant produced in the US in 2001. The report, A CUSTOMER NEEDS ASSESSMENT FOR THE INDEPENDENT LUBRICANT MANUFACTURING BUSINESS, 2001, also reveals that when taken together, independents are a large producer of lubricants in virtually all product segments (including automotive lubricants), and the leading producer of lubricants in metalworking fluids and greases, as shown in Figure 1.

To fuel its production of finished lubricants, independents purchased close to 700 million gal of base oil in 2001 (excluding additive diluent oil), or 24% of total US demand.  Paraffinic base oil is the leading type at nearly 80%. Naphthenics follow, and are used primarily in metalworking fluids, grease, and other industrial lubricants.  But, according to Thomas F. Glenn, president of Petroleum Trends International, Inc., the combined consumption of additives by the independents is even more impressive. When taken together, Glenn notes, “independents purchased nearly 850 million lbs of lubricant additives in 2001, or 35% of the total US demand.”  Although independent lubricant manufacturers account for 27% of the finished lubricant production, Glenn notes, “they have disproportionably higher demand for additives due to their strong presence in metalworking fluids.” Metalworking fluids typically require comparatively higher additive treat rates than other lubricants.

Beyond the quantitative data in the report, A CUSTOMER NEEDS ASSESSMENT FOR THE INDEPENDENT LUBRICANT MANUFACTURING BUSINESS, 2001 focuses on what it takes for base oil and additive suppliers to be attentive to the wants and needs of independent lubricant manufacturers. And as Glenn notes, “these needs are moving through a period of significant transformation and some traditional suppliers are reportedly falling short of buyer expectations.”   

According to Glenn, “this developing gap is in part a function of the added complexities arising out of the emergence of Group II, II+, and III base oils and the more challenging lubricant performance specifications associated with GF-3 and PC-9.”  These factors, together with “the distraction of magamergers, shifts in captive demand, corporate downsizing, the recession, and others are reshaping the business. And as a result, they have opened new windows of opportunity for base oil and additive suppliers to capture market share and even valued links in the supply chain; particularly for those suppliers who demonstrate a true interest in doing business with independents,” Glenn notes. These opportunities, however, can be hard to find if one assumes its business as usual when selling base oil and additives to independent lubricant manufacturers. And even more elusive if one assumes the wants and needs of the independent are the same, or that the role of independent lubricant manufacturers is not being reshaped by consolidation, commoditization and other factors driving change in others parts of the business. It is, and this change will continue.
 
Figure 1
Estimated Production of Lubricants by Majors and Independent Lubricant Manufactures, 2001-a  

Source: Petroleum Trends International, Inc.

A CUSTOMER NEEDS ASSESSMENT FOR THE INDEPENDENT LUBRICANT MANUFACTURING BUSINESS, 2001, is one in a Two Volume set of reports designed specifically to assist major oil companies, independent lubricants manufacturers, base oil and additive suppliers, and others understand the dynamic wants and needs of their customers. 

Volume I – Selling Lubricants, provides subscribers with a detailed analysis of lubricant demand, trends and market developments in 23 commercial and industrial end-use industries.

Volume II – Base oils and Additives, focuses specifically on what it takes to be a successful supplier of base oils and additives to independent lubricants manufactures. 

For more information or to subscribe to the study, please visit www.petroleumtrends.com or contact Thomas Glenn at 732-494-0405