Globally, approximately 69 percent of the finished lubricant demand is converted into used oil. Of the total used oil collected, 78 percent is consumed as industrial fuel and 16 percent is re-refined, finds the recently released study “Global Used Oil 2009: Market Analysis and Opportunities” from global consulting and research firm Kline & Company.
Following significant technological advances in the last 10 years, the re-refining industry has reached a stage where it can produce re-refined basestocks on par with virgin basestocks. Awareness of the quality of re-refined lubricants is spreading among a growing band of end-users; however, this perception is not nearly universal and customer hesitance due to perceptions of poor quality and inconsistent supply still prevents a larger-scale industry growth.
Used-oil collection and disposal rates differ significantly across countries, and even by states and municipalities. Although used oil collection regulations exist in most countries, varying levels of enforcement and incentives mean that, globally, of the total used oil generated, only about 74 percent is collected. The remaining 26 percent is combusted, re-used without appropriate treatment or discarded.
The front runner of the re-refining industry is Europe. Thanks to strong regulation and enforcement, nearly 90 percent of all used oil is collected, and 50 percent of this is sent to re-refining. As a result, re-refined basestocks at present account for 13 to 15 percent of the overall basestock supply in the region.
Influencing the utilization of used oil are the economic values of different disposal options. North America’s collection rates are comparable to those of Europe; however, more than 80 percent of the used oil collected is used in various fuel applications, while only about 12 percent is sent to re-refining. It is considerably cheaper and less complicated to prepare used oil for fuel applications.
With the exception of Brazil, where strong regulation favors re-refining, collection rates are low in other parts of the world – approximately 60 to 70 percent of the total, in comparison to 85 to 90 percent in Europe and North America. Furthermore, of the total oil collected, a significant portion is used as fuel, whereas re-refining accounts for a small percentage.
There are three key drivers for growth in the re-refining industry. First, growing virgin basestock prices due to high costs of crude oil have increased interest in re-refined basestocks. Second, improvements in re-refining technology have dramatically improved the quality of re-refined basestocks, allowing them to be used in blending of a growing range of lubricants. Third, regulation in Europe, and increasingly in North America, favors re-refining.
However, to achieve its potential, the re-refining industry will have to deal with a number of challenges. Chief among these are negative customer perceptions. End-users who have no experience with re-refined basestocks equate them with poor-quality, substandard and adulterated products. They also tend to clump all re-refining technologies and re-refined basestocks into one category. This hurts re-refiners who use advanced technologies to produce high-quality basestocks.
Despite the negative impact of the 2008-2009 recession on the global consumption of lubricants, Shell managed to retain its position as the global market share leader for the fourth consecutive year. Shell accounted for 13.4 percent of all finished lubricant sales in 2009, according to a report published in September by Kline & Company.
Shell outperformed ExxonMobil and BP, which ranked second (11 percent) and third (7 percent), respectively, in global market share. Chevron, Total and Petro-China rounded out the top six.
Kline’s report estimated global lubricant demand in 2009 at 35 million tonnes. This significant decline of 8.4 percent over the previous year followed the 2.6 percent decline that the industry experienced between 2007 and 2008.
As predicted by Kline, the impact of the global recession has been less severe in the Asia-Pacific region. This region continued to show the most robust growth on a volumetric basis, and now accounts for 39 percent of the total global market. This trend, which has seen Asia-Pacific become an increasingly significant global market player, is likely to prevail as China and India are expected to continue to be the growth engines for the lubricants industry in the future.
On the other hand, the United States is among those markets most severely curtailed by the economic downturn, and experienced a double-digit decline in 2009.