Base Oil Market to Reach around US$ 38.5 Bn by 2026

Base oil is a primary raw material used in the production of lubricants. The usual composition of industrial lubricant is 90% base oil and 10% additives, while that of automotive fluids is 80% to 85% base oil and 15% to 20% additives. Various types of base oils, such as paraffinic, naphthenic, and bio-based, are available in the market. Higher the quantity of paraffin in base oil, higher is its viscosity index. Viscosity is an entwined property of base oil that is crucial for lubricity & cooling and production of effective and efficient lubricants. Base oil is a downstream product, which is obtained after the fractionation process of crude oil. Thus, commercial dynamics of base oil are closely tied to performance, availability, and volatility of crude oil in the market.

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Key factors driving the demand for base oil across the globe are rapid industrialization of several economies, rise in sale of vehicles, and increase in logistics & trade. Sales of vehicles is a direct indicator and driver of the demand for lubricants. High number of vehicles translates into high demand for lubricating oil, and high demand for lubricating oil translates into high demand for base oil. Various nations such as India, China, South Korea, Mexico, Indonesia, Thailand, and Malaysia have registered substantial rise in vehicle sales. This has boosted the demand for lubricants and base oils. Key areas of application of base oil are industrial oils, hydraulic oils, and process oils.

These applications are fueled by rapid industrialization of several developing nations, primarily China, India, and Brazil. Industrialization requires installation and operation of a wide range of machinery and equipment. These require lubricants, and by extension, base oil. Demand for base oil is also increasing due to the growth in trade and logistics operations. Moving goods from one place to other involves large machinery and transportation vessels such as ships, port handling equipment, cranes, locomotives, trucks, and commercial vehicles. All these vehicles and equipment require lubricants. This is propelling the demand for base oils. Base oil does not have any external substitutes.

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Of late, the base oil industry has undergone transformation. Manufacturers across the globe are switching from group I base oil to other options, namely group II, group III, and synthetic base stocks. Improvement in standard of living and implementation of stringent regulations have compelled automakers to increase fuel economies and reduce emissions due to environmental concerns. Lubricant manufacturers are demanding better quality base stocks, with low sulfated ash, phosphorous and sulfur (SAPS) to enhance engine performance and fuel economy. This has hampered the demand for group I base oils. Decline in demand for group I base oil has led to lower utilization rates of group I facilities. This has compelled many manufacturers of group I base oil to cease operations. Yet, contrarily, new facilities of group II base oil are emerging rapidly across the globe in order to cater to the demand for group II base stocks.

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