Synthetic Lubricants Market size is forecast to reach $40 billion by 2025, after growing at a CAGR of 3.2% during 2020-2025. The rising automotive industry and industrialization globally are driving the demand for synthetic lubricants. The introduction of environmental legislation in the automotive sector to minimize carbon emissions is expected to improve the demand of synthetic lubricants and provide a range of opportunities for synthetic lubricants manufacturers. The use of synthetic lubricants is growing due to their properties, such as water solubility, high viscosity indexes and biodegradability. However, high cost is a significant restriction observed in the market for synthetic lubricants.
Synthetic Lubricants Market Segment Analysis – By Type
Polyalphaolefin (PAO) held the largest share in the synthetic lubricants market in 2019. The most popular form of synthetic base oil is PAO, also called synthetic hydrocarbons. They are high-performance synthetic lubricants that are generated by alpha olefin catalytic oligomerization. PAO is the most commonly used synthetic lubricants across a wide range of applications, and in high volume. They possess certain physical and chemical properties that are inherent, such as lower volatility, higher viscosity index, lower pour point, and better oxidative and thermal durability. They are primarily used in engine oils, hydraulic oils, transmission oils, and compressor oils as high-performance functional base fluids. In a broad range of applications, the wide operating temperature range and oxidative stability is driving the demand for the PAO segment.
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Synthetic Lubricants Market Segment Analysis – By Product Type
Engine oil held the largest share in the synthetic lubricants market in 2019 and is growing at a CAGR of 3.4%. Demand for engine oil is driven mainly by the growing automotive industry which includes personal vehicles and high freight transport. The rapid growth of the automotive industry, especially in the APAC region, is also responsible for this dominance. For instance, According to OICA, the production of light commercial vehicles has augmented by 10.2 % in 2018 in the APAC region. According to the International Trade Administration (ITA), China is the world’s largest vehicle market and the Chinese government is expecting that automobile production will reach 35 million by 2025. Engine oil is mainly used in motor vehicles to reduce metal-to-metal contact, minimize overall friction and reduce damage. These liquids improve the efficiency of friction of the brake band, valve operation, lubrication of the gear and torque conversion. Rising vehicle sales are expected to be a key driver of the engine oil segment.
Synthetic Lubricants Market Segment Analysis – By Geography
Europe held the largest share in the synthetic lubricants market up to 30% in 2019. Increased investment in synthetic lubricant blending plants in Russia and the Netherlands, among other countries, is driving the demand in Europe. In addition, strict regulations on CO2 emissions from vehicles have increased the demand for fuel-efficient lubricants, thereby driving the market for synthetic lubricants in the transport sector. In recent years, several national eco-labels and schemes and one international standard have been established, setting criteria for lubricants’ ecological and technical characteristics. By implementing these requirements, the market for synthetic lubricants in various industrial and automotive applications has increased.
Synthetic Lubricants Market Drivers
Growing automotive industry
The automotive industry has seen substantial growth in the production and sales of vehicles over the years. In 2017, global vehicle production was approximately 97 million units, according to the OICA. The automotive industry is currently experiencing a period of substantial growth in APAC and North America, among other regions, and annual vehicle sales have dramatically increased. The growth of the automotive industry in APAC and North America has been fueled by technological advances. The primary operating base of Fiat Chrysler Automobiles N.V., Volkswagen, General Motors, and Ford is Brazil. In 2017, vehicle sales rose by 9.2 percent overall. In the near future, growing population levels in countries such as Brazil and Russia will also contribute to more development in the automotive industry. The rising production of vehicles is seen as a positive factor responsible for the growth of the demand for synthetic lubricants. The rising number of road vehicles is having a significant effect on the market for synthetic lubricants. The average age of a passenger car and a light truck rose from 9.1 years and 8.4 years respectively in 2000 to 11.6 years in 2017, according to the Bureau of Transportation Statistics. The growing demand for fuel efficiency, in addition to the increasing vehicle fleet, has led to the increased use of high-quality oil and lubricants, which in turn is having a positive impact on synthetic lubricants market.
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Synthetic Lubricants Market Challenges
Rise in demand for alternative fuel
A significant problem associated with the use of petroleum-based products is climate change. Lower CO2 emissions arise from the use of alternative fuels in vehicles. The emissions from a compressed natural gas (CNG) vehicle are about 60-90 percent lower compared to a gasoline vehicle, while a liquefied petroleum gas (LPG) vehicle decreases carbon monoxide by about 30 to 90 percent. The Energy Policy Act (EPACT) in the US was converted into law in 1992 due to concerns about petroleum consumption, climate change, and mobile source emissions. The US and European governments, such as Germany, France, Norway, Sweden, Austria and Switzerland, are seeking to reduce their dependency on petroleum products. These factors may restrict the synthetic lubricants demand.
Synthetic Lubricants Market Landscape
Technology launches, acquisitions and R&D activities are key strategies adopted by players in the Synthetic Lubricants Market. Major players in the Synthetic Lubricants market includes Exxon Mobil, Shell, British Petroleum, Total, Chevron, Fuchs Group, Pennzoil, Amsoil Inc., Kendall (Phillips), Valvoline, Castrol, among others.
Europe dominates the market in 2019, owning to massive industrial growth and government policies and initiatives supporting manufacturing sectors.
The superior performance of synthetic lubricants over their mineral equivalents in terms of high temperature operating range, low friction and higher load carrying capacity will further fuel their demand.
However, demand growth is affected by the high price of synthetic lubricants. The price of synthetic lubricants can be 2-5 times higher than that of mineral oil lubricants. The price of silicone-based synthetic lubricant can be as high as 20 times the price of mineral oil lubricants. Reducing the price of synthetic lubricants, particularly in price-sensitive markets, is a huge challenge for market players.
Operations in various industries such as oil & gas, automotive, and aerospace is being significantly affected due to the COVID-19 epidemic, as most of countries have issued “stay at home guidance” i.e., lockdown. And it is expected that the outbreak of COVID-19 will be seen in the whole year of 2020, and a few months in 2021. This is limiting Synthetic Lubricants market growth.
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