Asia Pacific Base Oil Market size is forecast to reach $4 billion by 2025, after growing at a CAGR of 3.30% during 2020-2025. Base oil is the refined petroleum mineral or synthetic material produced by a refinery to a required set of specifications, typically lubricant base stock. The demand for base oil is expected to witness a steady growth in the Asia-Pacific countries. The market size is expected to increase in Asia-Pacific, due to the economic growth in the nations such as South Korea, China, and India.
By Grade – Segment Analysis
Group II segment held a significant share in Asia Pacific base oil market in 2019. Group II base oil can be employed in a multitude of applications, such as marine and gas engines, in trunk piston engine oils, and other applications in the base oil industry. The high consumption of Group II base oil is mainly attributed to its higher performance and affordability in comparison to the other groups of base oil. Group II and III base oils possess higher oxidation stability and lower sulfur content and volatility as compared to Group I base oils. Additionally, they have higher solvency power than that of Group I oils. Thus, Group II and III base oils are suitable for use in the formulation of lubricants, typically for passenger cars, heavy-duty vehicles, and automatic transmission engines. These characteristics of Group II and III base oils are likely to propel the demand for these oils during the forecast period.
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By Application – Segment Analysis
Automotive fluids segment held a significant share in Asia Pacific base oil market in 2019, growing at a CAGR of 3.36% during the forecast period. Based on application, the global base oil market has been segmented into automotive fluids, process oils, industrial oils, metalworking fluids, hydraulic oils, and others. In the automotive industry, base oils are widely employed to manufacture lubricants. Lubricants play a vital role in automotive engine, transmission and steering mechanisms by reducing friction and heat generation. In some cases, these lubricants simultaneously cool automobile components.
Hydraulic oils are widely used in excavators, backhoes, brakes, power steering systems, transmissions, garbage trucks, and aircraft flight control systems, as these provide superior thermal and oxidation stability, low pour points, high viscosity index, and superior heat transfer.
Geography- Segment Analysis
China dominated the Asia Pacific base oil market with a share of more than 39%, followed by India and South Korea. This growth may be attributed to high production and sales of vehicles in the region. The demand for the product in Asia Pacific is expected to be driven by the development of automotive industry along with the resultant demand for finished lubricants to improve the operational efficiency of the vehicle imparting longer life. Utilization of automotive oils in diverse automotive lubricating applications is expected to fuel the market growth. Automotive oils are likely to retain their dominance in the Asia Pacific market owing to high passenger car and commercial vehicle sales, along with the rising awareness regarding emission reduction standards and legislations which are promoting efficiency in these vehicles.
China, the world’s largest automotive producer, is majorly focusing on increasing the production and sale of electric vehicles in the country. For this purpose, the country plans to increase the production of electric vehicles (EVs) to 2 million a year by 2020, and 7 million a year by 2025. Countries, such as Philippines, Vietnam, and Indonesia, have been witnessing strong growth in the construction industry. Investments in residential and commercial construction in these countries have been increasing at a robust rate. This is further expected to increase the demand for Asia Pacific base oil in construction applications in the forecast period.
The base oil market in China is bearing the brunt of coronavirus (COVID-19) restrictions, while companies in other countries are taking cautious steps. Base oils editors in Independent Commodity Intelligence Services (ICIS) opine that manufacturing plants in China have been temporarily shut as a direct consequence of the coronavirus outbreak. As such, trade activities in the Middle East have been limited, while local oil refiners of the base oil market in China have been forced to lower their operating costs. This has been carried out to reduce the pressure on inventories due to transportation restrictions in certain provinces of China.
On the other hand, some refiners in China are functioning in full capacities to capitalizing on the downtick in crude oil prices. Lowered prices of crude oil are generating increased sales, thus helping to revive economic growth. As such, there have been no delays in shipments to China from Asian suppliers.
Drivers – Asia Pacific Base Oil Market
Increase in industrialization in developing economies to drive Asia Pacific base oil market
Growth of sectors such as industrial machinery, automotive, and energy in developing economies, such as China, India and South Korea is driving the demand for lubricants and its derivatives such as finished lubricants. Demand for eco-friendly synthetic hydraulic oils or hydraulic fluids have been increasing, owing to depletion of crude oil levels and rise in focus on protection of the environment. These oils are employed in various end use industries such as aviation, manufacturing, construction, and automotive. Hydraulic fluids transfer power; perform lubrication; prevent corrosion and wear of machines; and act as a heat transfer medium. Rapid industrialization and mechanization of industries is boosting the demand for hydraulic fluids. This, in turn, is driving the Asia Pacific base oil market.
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Challenges – Asia Pacific Base Oil Market
Volatility in prices of crude oil restrains Asia Pacific base oil market
Prices of crude oil are affected by events that can potentially disrupt the supply of oil and gas. These include geopolitical and weather-related issues. Geopolitical events can create uncertainty about the demand for and supply of oil and gas. This can lead to high volatility in prices of oil and gas. Crude oil is a raw material directly used for base oil production. Hence, price fluctuation is directly reflected in base oil prices. This has created volatility in prices of and demand for base oils and lubricants. This hampers the Asia Pacific base oil market.
Technology launches, acquisitions and R&D activities are key strategies adopted by players in the Asia Pacific base oil market. In 2019, the market of Asia Pacific base oil has been consolidated by the top five players accounting for xx% of the share. Major players in the Asia Pacific base oil market Chevron Corporation, Exxon Mobil Corporation, S-OIL Corporation, Motiva Enterprises LLC, SK innovation Co., Ltd., AVISTA OIL AG, Nynas AB, Repsol S.A., Ergon, Inc., Calumet), H&R Group, Sinopec Corp., and PetroChina Company Limited among others.
Agreement/ Geographical Expansion
In September 2019, Repsol signed an agreement for purchase of 40% stake in United Oil Company, a Singapore-based lubricant manufacturer that produces and supplies Repsol’s products in Singapore, Indonesia, Malaysia, and Vietnam. The agreement would allow the former to expand its presence in Southeast Asia, one of the world’s largest and most rapidly expanding industries for lubricants.
In April 2018, Petrobras Distribuidora SA, a subsidiary of SAC Petrobras S.A., announced its plans to expand its Duque de Caixas lubricants plant in Rio de Janeiro to increase its production capacity by 55%, reaching 42 million liters per annum.
In May 2017, Calumet Specialty Products Partners, L.P. launched group III base oils under the brand name of CALPAR 4GIII. The product is a high-quality paraffinic base oil manufactured by the company’s in-house team of R&D and technical refining engineers. It conforms to requirements of the American Petroleum Institute (API) regarding Group-III base oils. API group III base oils have viscosity index levels of above 120 and high saturated content. The launch of the new product has broadened the company’s portfolio to include Group I, Group II, Group III, Group IV, and Group V base oils.
Since the major portion of Lubricants is used in the automotive industry, the markets for base oil in Asia-Pacific are witnessing the fastest growth.
The increasing GDP of countries in APAC region, such as India and China, is expected to fuel the demand for automobiles, thus driving the Asia Pacific base oil market growth.
Based on application, the automotive fluids segment led the Asia Pacific base oil market in 2019.
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