Perspective on the Marine Lubricants Demand Study from Grand View Research
Mike Guggenheimer, President & CEO
I recently had the opportunity to review the latest Marine Lubricants Demand Study from Grand View Research. I’d like to share some perspective on the study’s findings in the form of five key takeaways, and connect them to what we see at RSC Bio Solutions in this segment.
1. Global cargo fleets and the global shipping industry are both growing, which has a big impact on the marine lubricant market.
First, the macro trend for the shipping industry is very positive. Global cargo fleets and the global shipping industry are growing, which directly impacts the marine lubricant market. As the global population grows and trade interaction becomes more global, it isn’t surprising that the shipping industry is growing. What you might find interesting is the relatively strong growth of seaborne trade, which, according to the study, is expected to remain a key driving factor for global marine lubricants market over the next six years. The study also finds that, over 90% of global trade is done through the sea, a factor which is contributing to disproportionate growth for seaborne trade and related segments. We are seeing the impact of this directly, as demand is increasing for marine lubricants around the world. As a result, we are taking steps to expand our worldwide distribution channels to meet demand for EALs (Environmentally Acceptable Lubricants).
2. There is an increasing dependence on hydraulic mechanical parts in ships.
In addition to the macro growth trend, the study indicates that there is an increasing dependence on hydraulic mechanical parts on ships. As a result of the increasing use of hydraulic systems on ships, Grand View indicates that “hydraulic oil is expected to be one of the fastest growing application segments for marine lubricants, growing at an estimated compound annual growth rate of 3.4% from 2014 to 2020.” Our experience supports this view—our customers are showing increased demand across a range of hydraulic applications. Often the large propulsion systems and oils for stern tubes get the attention in the marine market, but today’s modern fleets use complex deck side and supportive hydraulic systems from vessels specifically designed to lay cables for offshore wind farms to massive roll-on/roll-offs (RORO’s) with adjustable deck configurations to accommodate everything from a small car to a large helicopter. We also work with some of the largest cruise ships in the world, who have to squeeze a lot of equipment into very small spaces. For all of these applications, the hydraulic oils are critical and, at RSC Bio Solutions, we must be able to demonstrate that our EnviroLogic® fluids will work across an ever-broader range of applications.
3. Global markets – specifically Europe and Asia Pacific – have significant impact on industry demand.
In addition to addressing overall growth in the shipping and hydraulic oil segments, the study also examines geographic growth trends, noting that Europe and Asia Pacific will see the biggest growth in the years ahead. Specifically, the European market, which accounted for 46.2 percent of total demand in 2013, is characterized by high investments for lubricants of different grades coupled with increasing seaborne trade, specially food & beverages and packed foods.
From our perspective, we continue to see strong European demand, but we are increasingly seeing the business grow in the Asia Pacific region. Our products are connected to maintenance events and major dry dock repairs, and the growth in Asia is very strong from a maintenance standpoint.
Grand View notes several additional factors contributing to growth in Asia Pacific:
“Several market participants have been shifting their manufacturing bases to high growth regions of China and India owing to governmental favors in terms of tax benefits and financial incentives. Additionally, the emission standards in Asia Pacific are not as stringent as they are in U.S. and Europe. These micro and macro factors are expected to propel the regional growth of marine lubricants market.”
As mentioned above, we are responding to this demand in several ways. In 2014, RSC Bio Solutions opened a warehouse in Rotterdam, Europe’s largest port. We have also increased stocking levels of EnviroLogic hydraulic fluids through distribution partners like DistributionNOW in locations like Singapore, Mexico, Brazil and Dubai.
4. Material prices and regulations will remain challenges for the industry.
From my perspective, the more interesting trend identified in the study is around the increasingly complex regulatory environment and material pricing environment. Grand View states that “volatility of raw material prices coupled with stringent environmental regulations for manufacturing synthetic lubricants is expected to remain key challenge for market participants.” What we see is that ship owners and ship management companies are becoming overwhelmed by myriad of regulations in various parts of the world. This was made very clear to me during my recent trip to European Shipping Week in Brussels where many ship management company leaders were quick to share their sense of frustration. As trade routes become broader and fleets are redeployed to new areas it can be a nightmare to understand the regulatory impact. The Grand View study supports this and suggests the following:
“In order to overcome these challenges, manufacturers have been collaborating with bio-technology companies to develop bio-based alternatives conventional marine lubricants. This is further supported by government favors and tax incentives for employing clean technologies.”
At RSC Bio Solutions, we try to act as a consultant in this regard. Through nearly two decades of work with industrial biotechnology and a focused effort to help land and marine fleets address the risk that comes along with regulations, we can provide insight and help. Of course, the changing and increasing regulations are a factor in the growth in demand for our suite of biobased and biodegradable solutions. We believe that the market for biobased and biodegradable lubricants will continue to grow much faster than the overall market as marine operators recognize these products’ proven performance in a full range of maritime applications, paired with their ability to meet global regulatory requirements.
5. The market remains extremely competitive.
Finally, I found the study’s comments about the competitive nature of the lubricant market interesting. Grand View describes the global marine lubricant market as “oligopolistic in nature” and one in which market participants compete on the basis of product development and overall profitability. We would certainly agree that a few firms dominate, particularly regarding engine oils. At the same time, as the market needs shift and the emphasis on reducing risk increases, there is an opportunity for new players and new technology to enter.
The Grand View Research Study offers great insights into the marine lubricant market, and the findings support the focus and efforts of RSC Bio Solutions. We’re committed to making the business case for new technologies that solve problems arising for marine fleets living in a world made very complicated by regulatory change and strong public concerns around environmental safety. We’re here to help you navigate these unchartered waters, so please feel free to contact me or a member of my team.