The latest on base stock trends

Let me start by talking about the base stock quality. Specifically performance requirements set by original equipment manufacturers dictate the attributes of the lubricants needed to protect their equipment. Now many of these performance requirements are set to achieve societal aspirations linked to energy reduction and environmental goals. Consequently, we expect to continue to see an increased demand for base oils that have lower viscosity, higher VI, lower pour point, lower CCS and lower NOACK. Now, manufacturing these high performing base stocks is intense from a capital and energy perspective. So continued innovation of higher performing catalysts that upgrade molecules and reduce yield loss, increasing flexibility of the feedstocks that can be processed using existing equipment and still meet the same base stock qualities, reducing energy usage through more efficient equipment and using advanced process and quality controls to optimise unit performance will probably all be important technology focus areas.

We see continued growth in electric and hydrogen fuelled vehicles with these engine types supplying 15 to 20% of the oil equivalent energy means of propulsion by 2050.
Another consideration is whether internal combustion engines will remain relevant over the next few decades. Now based on our estimates and analysis, we project that the number of vehicles expected to be fuelled by gasoline, diesel, natural gas, LPG and full-hybrids, so engines requiring lubrication based on internal combustion technologies, will be fairly stable in 2040 in comparison to 2023.

The commercial transportation segment will have the biggest volumetric growth driven by trucks, shipping and aviation. And this increase is a result of supply chain development globally to fulfil the needs of a growing economy and increasing living standards, and applications will also evolve to achieve more efficient operation and reduced emissions.

For any vehicle that requires an internal combustion engine, the performance requirements will continue to evolve to meet stricter emissions regulations and improved fuel efficiency. Advanced engine technologies such as downsized engines, turbocharging and hybrid powertrains require lubricants with specific properties to handle higher temperatures, pressures and loads.

Developing lubricants that meet the demands of these technologies presents an opportunity for lubricant manufacturers to provide specialised products to enhance engine performance. As the adoption of battery electric vehicles increases the crankcase lubricant market may experience a shift in demand. While EVs don't require crankcase lubricants for their electric motors, there will still be a need for lubricants in other components such as gearboxes or differentials. Lubricant, manufacturers can focus on developing specialised high performance products for EVs, including thermal management fluids for batteries, specialised EV driveline lubricants and greases for ancillary equipment. So we're really anticipating a future lubricant world that is increasingly diverse with new challenges and new opportunities.

While total demand will be steady, our expectation is that crankcase oils will shift toward higher performing lubricants and lower viscosities that likely will increase the demand for synthetic base stocks. Now, the sectors that are growing such as commercial transportation, electricity generation, industrial and manufacturing, support the increase in living standards around the world. And in general, these sectors need heavier lubricants and so there will be a steady demand for heavier base stocks. If you look at this trend from the perspective of base stock supply, we see continued growth in Group II and Group III to meet the increasing demand for improved efficiency in all sectors. We see a general trend toward ultra-low viscosities across multiple application segments driving the demand for high performance Group IV and Group V base oils.

Group III three will grow at a faster rate than Group II, driven by the need in engine oils for low viscosity, low volatility base stocks with good oxidation stability.

Group II will remain the predominant grade, as most of the applications that need heavy-duty commercial transportation and industrial lubricants can be manufactured with these base stocks. And Group I is likely to remain the prevalent choice for very heavy lubricants that require a heavy concentration of additives like marine lubricants.

Firstly, there's been a very consistent drive to improve energy efficiency in manufacturing and fuel economy and engines.

Another clear change is the increase in the volume and qualities of re-refined base stocks. This has been enabled by the maturity in many jurisdictions of lubricant waste regulation, which has really supported the development of an extensive used oil collection market. And these collection networks have significantly reduced improper disposal of used oil and allowed for higher value use of reused lubricants. We would expect this trend to continue as regulators drive to improve collection and reuse options.

As for bio-based lubricants, I would say there's a growing interest. Bio-based lubricants offer advantages such as a potential reduced toxicity and a potentially lower carbon footprint compared to conventional lubricants. Having said this, it's still a smaller layer of the market. Going forward it'll be interesting to see how technological innovation may make some of these solutions viable in a wider range of applications.

Because so many things are changing, it's important for suppliers to work with customers to understand their changing needs and develop a market driven value proposition that meets their goals.