Study: China to Drive Growth for Lubricant Suppliers After COVID-19

Noria news wires

According to a new study from Kline, China’s push to improve efficiency as part of its efforts to clean up air and reduce greenhouse gas emissions is set to drive upgrades in both the automotive and manufacturing industries. This is expected to provide opportunities for leading lubricant marketers to introduce the advanced formulations the new technology requires.

While China’s attention currently is focused on stopping the COVID-19 pandemic and minimizing its impact on its economy, curbing emissions has also been a high priority. Emissions of some of the most harmful particles have fallen dramatically in recent years, but limits are still well above World Health Organization standards. Government action is ongoing, pressing for cleaner energy, cars and manufacturing processes.

In the automotive sector, emissions limits and fuel-economy requirements are driving new vehicle sales. However, despite bold targets, 2019 sales of electric vehicles grew only 3 percent as subsidies ran out. While the coronavirus is temporarily slowing all vehicle sales, it is likely that China will rebound to keep its top position in global car sales in 2020.

This means the upgrade of the country’s vehicle fleet, still with a high proportion of internal combustion engines, will have a sequential quality upgrade for engine lubricants. This upgrade will favor multinational and major local suppliers, while smaller local producers could be squeezed out. Although these more efficient vehicles with longer drain intervals might not increase volumes, suppliers may see improved sales of premium products.

“We are seeing a similar picture in the manufacturing sector,” said David Tsui, Kline’s project manager. “Here, the Chinese government drive for growth, modernization and efficiency means new machinery is being introduced, which again might spell a decline in lubricant volumes but an increase in demand for premium products, which again is good news for both local and international oil majors.”

China energy demand accounts for more than 20 percent of the global total and is forecast to grow at 1 percent per year to 2040. With the focus of government action to cut pollution and greenhouse gases, this is driving the need to expand the use of clean energy to burn less coal, which currently provides 60 percent of the country’s energy. The effect of this action will be to increase the use of energy generated by natural gas, wind and other renewables.

“What we can expect here is a growth in turbine and compressor oils, which will be increasingly synthetic,” Tsui suggested. “This will again be good news for local majors and multinationals with strong OEM partnerships that can supply technologically advanced products, though perhaps local minors will struggle to compete.”

The new report, “Opportunities in Lubricants: China Market Analysis,” explores key trends, developments and challenges to help identify the areas of potential growth in both the consumer and commercial vehicle segment as well as the industrial lubricant sector. It also provides an analysis of the Chinese market, with detailed segment and product demand estimates to 2023.

For more information, visit www.KlineGroup.com.

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