Growth in the synthetics

market chimes with

sustainability goals
of automotive and
industrial end users
Pooja Sharma, Project Manager at Kline

The use of synthetic lubricants continues to grow Transition toward synthetics from conventional
globally, owing to emissions regulations being lubricants is more pronounced in highly developed
increasingly stringent, upgrading fuel efficiency and environmentally conscious nations such as the
targets, the inclusion of alternative fuels, OEM United Kingdom, Germany, Australia, and Japan,
recommendations, and a growing supply of synthetic especially in the private vehicle segment. Tightening
basestocks. Synthetic oils and fluids are becoming fuel efficiency norms as well as growing regulatory
the preferred choice of automotive and industrial end push toward sustainable fuels in these countries is
users, especially the leaders in industry best practices, resulting in an increase in the parc size of modern
such as automotive and metalworking companies. and alternative fuel vehicles, such as hybrid electric
vehicles (HEVs), plug-in hybrid electric vehicles
Nearly one-fourth of the global demand for (PHEVs), and bio-fuel compatible vehicles. These
lubricants is currently being met by full synthetic and vehicles embody new technology and design
semi-synthetic products. The balance demand is still upgrades that command synthetic lubricants.
met by conventional mineral oil-based products still Synthetic lubricant demand in other country
accounting for a large share — 75% of the total markets is also catching up fast, as these nations
lubricant market. However, the demand for synthetic refine their national emission and fuel efficiency
is growing at a fast pace of around 6–7% annually, standards.
while the global demand for lubricants remains flat.
This means that synthetic lubricants are growing Synthetic lubricants are becoming the
globally, at the expense of conventional lubricants, mainstream oils for private vehicles
and are taking up their market space. Synthetic lubricants currently account for nearly half
of the global private vehicle lubricant (PVL) demand,
Figure 1: Global Finished Lubricant Demand by Product Type, 2020.
driven by the need for better-performing fluids for
modern equipment. Geographically, Europe and
North America have seen the strongest growth in
full synthetic and semi-synthetic lubricants, primarily
driven by the private vehicles market. Many advanced
European countries, such as the United Kingdom and
Germany, have largely adopted synthetic lubricants in
the private vehicles category. Synthetic oils account
for penetration levels as high as 70% in PVL in these
countries. In North America as well, the penetration of
a-Industrial volume in the
synthetic oils in PVL is well above 60% in the United
figure above does not
include process oils. States and Canada.

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 Asian markets are also catching up. Developing
countries with large volume demand, such as
China and India, are currently undergoing the
implementation of new and stricter emission
standards, resulting in the upgradation of car parcs
in these countries. China is currently witnessing a
transition from National V Standards to National VI
Standards, and the Indian private vehicles market is
Figure 2: Penetration of Full and Semi-Synthetic PCEOs in 15 Key Country leapfrogging directly from Bharat Stage IV standards
Markets Across the World, 2020.
to Bharat Stage VI (BS VI). Automotive OEMs in
these countries proved to be ahead of the curve by
Passenger car engine oils (PCEO) are the flag bearer introducing vehicles compliant with the new emission
of synthetic fluids growth in the global lubricant standards months before these standards were
markets. The use of synthetics in this product implemented. For example, in India, Maruti Suzuki
category has reached nearly 57%, a significant rolled out BS VI-compliant vehicles models in 2019,
growth compared to 48% in 2018, as reported and others such as Tata Motors and Mahindra &
in Kline’s previous in-depth study on this topic. Mahindra rolled out BS VI-certified models months
In Europe more than three-fourths of the PCEOs before BS VI standards came into effect in April
currently in use are synthetic. Countries such as 2020. These OEMs also recommend full synthetic and
Germany and the United Kingdom top the list semi-synthetic lubricants to support the performance
for synthetic PCEO consumption globally, with of the engine hardware design upgrades in their cars.
penetration levels as high as 80–90%.
Other Asian countries such as Indonesia and Vietnam
Synthetic PCEO penetration levels in the developed are predominantly cost-conscious markets, which
countries of North America have reached 60–70%, rely heavily on mineral oil-based lubricants. These
driven by OEM technical demand. Leading passenger countries may transition toward synthetic fluids
vehicle OEMs in the United States, such as General in the next five years; however, they are likely to
Motors and Ford, are now recommending 0W-20 exhibit a higher appetite for semi-synthetic lubricants
and 5W-20/30 viscosity grades of engine oils, rather than full synthetic, as semi-synthetics are
which are synthetic. Further, Toyota, a Japanese car more economically priced. Also, in some of these
manufacturer, recommends even lower viscosity countries, the share of two-wheelers is much
grade engine oils, such as 0W-16, for both factory larger than that of passenger cars. For example,
fill and service fill applications. This transition toward in Vietnam, more than 90% of the consumer
synthetic engine oils in the region is driven by the vehicle parc comprises two-wheelers, belonging to
regulations for fuel efficiency being increasingly OEMs such as Honda, Yamaha, and Piaggio, which
stringent, as well as the upgradation of lubricant currently use conventional oils. In the future, the
performance requirements. In March 2020, new prudency of these vehicle owners is likely to keep
CAFE standards were introduced by the U.S. them more inclined toward semi-synthetic oils rather
Environmental Protection Agency (EPA), which than full synthetic.
require cars to improve on fuel efficiency from the
current average fuel economy standards of 35.5 Strict emission and fuel efficiency norms are
miles per U.S. gallon to 47.7 miles per U.S. gallon by stirring up growth opportunities in synthetic
2026. The pressure to meet these CAFE mandates HDEOs
will drive the market toward lower viscosity engine In the commercial vehicle segment, heavy-duty
oils grades that offer improvement in fuel economy engine oil (HDEO) is seeing higher volumetric growth
and work better with turbocharged engines. In of synthetics, though the penetration levels in this
addition to the new CAFE standards, the API category remain distant from those in the PCEO
service category for engine oils was also upgraded category. In the last two years, the share of synthetic
in 2020, and the new service category, GF-6, was oils has increased in this category from 12% to 16%,
commercially licensed. The products that meet these driven by the changes taking place in commercial
standards are typically full synthetic. vehicle fleets in developed economies of the world.

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 Strict fuel efficiency norms, upgradation of lubricant
specifications, and low current penetration rates of
synthetic fluids in the CVL segment are anticipated
to favour the growth of synthetics in this market.
Top-ranked countries in synthetic penetration in HDEOs,
such as the United Kingdom and Germany, are still
at 60% of synthetic demand. Other country markets
are well below this level. For instance, the two largest
Figure 3: Penetration of Full and Semi-Synthetic HDEOs in 15 Key Country volume markets for HDEO, the United States and
Markets Across the World, 2020. China, are still at under 20% penetration of synthetics,
showcasing a substantial potential for growth.
Europe has witnessed the highest levels of synthetic
penetration in HDEO, followed by North America. Growth for synthetics in industrial oils and fluids
Continuous renewal of commercial vehicle parcs is slow but steady
in these regions has been the main driver for On the industrial front, demand for synthetic
synthetics growth in the commercial automotive products remains more or less stable. The synthetics
segment, as new vehicles in the regions typically use penetration rate in this segment has increased 1%
synthetic lubricants. Regulatory norms for emissions through the last five years. Nevertheless, the future
and fuel economy at international and national trend for synthetics in this segment is toward growth,
levels incentivise OEMs in these regions to use and driven by environment protection and safety matters.
recommend full synthetic lubricants in their new
vehicle models. The United Kingdom is witnessing a Synthetic penetration in industrial oils and fluids is
strong transition toward synthetic oils. The country highest in the mature, industrial economies of Western
witnessed growth in registrations of new commercial Europe and North America, such as Germany, the
vehicles at a strong annual rate of 4% between 2012 United Kingdom, and the United States. These country
and 2019, driven by investments by fleet owners in markets lead the synthetics penetration rates, as all
the country to renew their fleets to align with Euro-6 these countries have well-established manufacturing
standards. The renewal of fleets to Euro-6 standards industries, advanced power generation industries, and
helped the fleets comply with London’s Ultra Low strict government and industry regulations for health,
Emission Zone and other planned Clean Air Zones. safety, and environment (HSE) issues.

In North America, the transition is fostered by the fuel Synthetic industrial oils demand is led by hydraulic
economy appeal of synthetic oils. The new API service fluids and metalworking fluids (MWF). Fire-resistant
category, API CK-4/FA-4 — which proffers engine synthetic hydraulic fluids are finding increasing
oils with lower high-temperature-high-shear (HTHS) demand driven by environmental and safety
viscosity, providing improved fuel efficiency over the regulations. For example, synthetic fire-resistant
existing service category oils such as API CI-4 and hydraulic fluids approved by the Mine Safety and
CJ-4 — has been introduced in the region. The region Health Administration are increasingly being used
has seen a visible shift toward CK-4 service category in roof supports in underground mining, keeping
oils, at the expense of the existing API CI-4 and CJ-4 in mind the safety aspect. In MWF, low misting
service categories oils. While CI-4 and CJ-4 service synthetic fluids are often used to ensure the work
category oils were more inclined toward conventional environment safety of industrial workers. Other
oil-based 15W-40 viscosity grade engines oils, the products experiencing growth in demand for synthetic
oils meeting the new service category CK-4/FA-4 oils and fluids include gear oils, compressor oils, and
are typically synthetic and are available in a lower refrigeration oils.
viscosity grade of 10W-30. The U.S. CVL market is
witnessing a transition of fleets belonging to very Lubricant suppliers are playing their part in
large national haulers to this engine oil grade due promoting synthetic oils
to its fuel economy benefits, the compliance with All leading lubricant marketers are currently focusing
OEM warranties, and the comparability of its price to their marketing efforts on their synthetic products.
15W-40 viscosity grade engine oils. They are investing heavily in branding and brand

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differentiation of their synthetic offerings as well Regional and niche lubricant suppliers are also
as promoting these products via sponsorships, growing in the synthetics market. These include
advertising, and discount offers. Suppliers are also RelaDyne and SuperTech in the United States, Cosan
investing in training technicians to promote sales of and Morris Oil in the United Kingdom, Lopal in China,
their synthetic products via installed channels such as and PT. Wiraswasta Gemilang Indonesia in Indonesia.
quick lubes, fast-fits, and garages. Typically, these suppliers economise from synthetic
lubricant performance claims by major marketers and
In an environment of reinforced global attention are able to offer synthetic products at lower price
toward sustainability, lubricant suppliers are proving points. These suppliers focus on offering lower-priced
their ingenuity by chiming their targets with global synthetic fluids and help price-sensitive customers
sustainability goals. Many lubricant suppliers are cross over to the synthetic fluids category.
currently working toward reducing carbon footprints
through manufacturing processes, product offerings, Synthetic lubricants will experience strong
and packaging. Striking evidence of this is the tailwinds driven by a need for more sustainable
addition of lubricating fluids for electric vehicles in the and better-performing fluids
product portfolios of some of the prominent suppliers In the next five years, the global synthetic/
such as Shell, ExxonMobil, Fuchs, Castrol, Valvoline, semi-synthetic lubricant demand is estimated to grow
and Total. These fluids are typically fill-for-life products at 6% to 7%, while the demand for conventional
that are formulated from synthetic base fluids. Other oils will slow down. OEM technical demand and
suppliers such as CITGO Chevron and Penrite have recommendations continue to remain the top
introduced sustainable packaging for their products driver for synthetic lubricant consumption due to
to reduce carbon footprints. For example, CITGO stricter fuel efficiency targets. In the passenger cars
introduced GOBOX, which is a fully recyclable segment, OEMs are now recommending 0W 20/30
cardboard package that helps reduce storage space and 5W-20/30 viscosity grades for engine oils, which
and produces 89% less plastic landfill waste than are synthetic. The commercial automotive segment
a conventional 24-quart bottle. This packaging is is experiencing a transition toward lower HTHS
available for full synthetic, semi-synthetic, and select oils belonging to the new API CK-4/FA-4 service
conventional lubricants only. category engine oils. Additionally, global regulations
CITGO’s Environment-Friendly Chevron’s Environment-Friendly for emission reduction and increasing fuel efficiency
Lubricant Package: GOBOX Lubricant Package: SMART CHANGE are also driving demand for more sustainable,
environment-friendly, and longer-service life products,
which can be met by synthetic fluids.

OEMs’ and lubricant suppliers’ push toward

synthetics, together with a regulatory impetus to use
sustainable, better-performing, and safe lubricants,
has set the stage for growth of synthetics. As a result,
the global lubricants market will continue to endure

PENRITE’s Environment-Friendly Bag-in-a-box lubricant package: ENVIRO BOX

Figure 4: Sustainable Packaging for Lubricants by Select Suppliers.

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a transition away from conventional mineral oil-based
lubricants toward better-performing and longer-
lasting full synthetic and semi-synthetic products,
which can also meet the requirements of new
emission standards/fuel efficiency. It is anticipated that
by 2025, the penetration level for synthetics in the
global lubricant market will increase to 30% from the
current level of 25%.

Figure 5: Forecast penetration of full synthetic/semi-synthetic lubricants,

2020-2025

Strong tailwinds are driving the lubricant industry

toward more sustainable and better-performing
synthetic oils. This has created a need for many
lubricant suppliers and marketers to formulate new
strategies and product offerings to meet the new
requirements.

LINK
https://www2.klinegroup.com/synthetics

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