Konstantin Melnichuk, Senior Consultant, Kline Group, will deliver a presentation on high-end synthetic lubricants at the 1st conference day – 23 May
1. In your opinion, what are the key opportunities and challenges in the European lubricant market?
One of the biggest challenges come from the fact that the European market has been essentially flat for several years in the past and very modest annual growth (less than 0.5%) is forecasted for the future. In this challenging environment many players are choosing to focus their marketing strategies around attractive segments, niches or country markets which experience faster than market growth rates – e.g. bio-lubricants, synthetic and semi-synthetic lubricants, several segments within the industrial lubricants space.
Players who are able to cut through market complexity by developing comprehensive segmentation and targeted strategies for selected attractive niches/segments focusing on value preposition for every customer group will likely to success more than the others.
Intensifying competition in the finished lubricants market place is another challenge. Power of OEMs is increasing in automotive and industrial markets, while OEMs are increasingly target aftermarket and provide added service for customers. Lower-tier/medium-tier market segment is getting commoditised by rising number of players offering genuine oils (e.g. independent workshop chains/dealerships such as Bosch) and other new entrants while on the other end specialty companies (like Kluber, Blaser Swisslube, Swisslube, Fuchs and many others) are able to consistently grow their market shares.
Challenging market environment creates opportunities for inorganic growth and favours players with distinct customer preposition and strategy over generalists.
2. What are the most important factors that will shape the lubricants industry in the years to come?
Changes to the underlying industries may become market disruptors for finished lubricants in the longer term. This includes coming mobility revolution – electric vehicles, new ride sharing mobility concepts and autonomous vehicles.
Full impact of ride-sharing and autonomous vehicles on mobility and as a result on finished lubricants is yet to be determined.
At the same time, the biggest immediate threat comes from rising population of battery powered vehicles which require no engine oil.
Other factors which likely to have a longer-term impact include changes in manufacturing methods (e.g. 3D printing); new digital concepts – industry 4.0/smart factories.
3. E-mobility – a threat or an opportunity for lubricants business?
Electric vehicles are a long-term disruptor for finished lubricants industry.
It will adversely affect finished lubricants demand for engine oil while creating opportunities for specialty oils – grease, transmission oil, battery coolants and other auxiliary products.
In the medium term, hybrid vehicles will be a “bridge” technology between current ICE vehicles and future fully electric vehicles. Hybrids have both electric and IC engines therefor would have a limited impact on engine oil market volumetrics while presenting similar opportunities for specialty niches.
4. Will synthetics see the same uptake in the industrial sector as automotive?
Kline estimates shows that penetration of fully-synthetic lubricants was at more than 40% for PCMO while just slightly higher than 10% for industrial lubricants on the European market in 2015.
Growth of synthetics in automotive applications is higher than in industrial lubricants so there is no sign of closing the gap between those two.
While there are applications and industries where use of synthetics is certainly very beneficial, it may not be viable for others. Longer drain intervals may not be appealing if lubricants are anyway changed at pre-determined scheduled intervals for the plant. Players may avoid switching to a different product due to associated costs, compliance and risk of process disruption.
At the same time, linking use of synthetic lubricants with overall plant objectives (energy efficiency, plant output or reduction of downtime, monetary savings) is key in being able to promote synthetic lubricants in industrial applications.
5. What do you expect from participating in the upcoming CIS Base Oils &Lubricants event, taking place on 22 – 24 May in Moscow?
I expect to meet several partners and colleges from the industry, establish new business connections with potential clients.