After several decades of development, China has become a leading lubricant producer and consumer, with the average annual output growing by 8.4% between 2006 and 2010, far higher than the global growth rate of 1.4%. However, directly stricken by the 2011 European debt crisis as well as inflation, China's automotive and machinery manufacturing industries suffered severe setback, causing the slowdown of growth or even negative growth in the output and demand of lubricant in China. In 2011, the lubricant output of China declined by 3.6% year-on-year to 8.262 million tons, and the apparent consumption dropped by 3.5% year-on-year to 8.493 million tons.
Lubricant Output and YOY Growth in China, 2008-2012
Source: NBS; ResearchInChina«China Lubricant Industry Report, 2012-2015»
Nevertheless, the huge potential of domestic demand for motor vehicles coupled with the growing investment in infrastructure construction during the 12th Five-Year Plan period (2011-2015) surely will fuel the lubricant consumption market. But on the other hand, a series of factors such as complicated and uncertain international situations, waste discharge regulations, profit-driven consideration of refineries and technological upgrade will exert influence on the supply of lubricant, especially high-quality lubricant products, in China to some extent. Thus, it is conservatively estimated that China's output and demand of lubricant will reach 9.747 million tons and 9.941 million tons by 2015, respectively.
China currently has roughly over 3,000 lubricant enterprises with more than 30 foreign ones included. But most of them are small-scale enterprises that have no access to high-quality lubricant market, especially automotive lubricant market. China Petrochemical Corporation (Great Wall Lubricant) and China National Petroleum Corporation (Kunlun Lubricant) have long been securing the top rank in the industry, with a combined market share of about 50%, while transnational tycoons including ExxonMobil, Shell, BP Castrol and others occupy nearly 30% in total.
Foreign lubricant brands show every confidence in the Chinese lubricant market and continue to increase their investment in China. Take Shell for example, Besides building and expanding lubricant capacity in 2011-2012, it put the advanced Zhuhai-based lubricant technology service center into use in 2012. Another case in point is Total (Tianjin), whose 200kt/a lubricant blending plant started construction as early as 2011 and is expected to be put into production in May 2013.
In addition, with rising environmental awareness as well as the release of favorable policies on waste lubricant recovery, China has seen growing proportion of lubricants made from recycled waste lubricant in recent years. There are a number of waste lubricant projects under planning or construction in China, including the 200,000 t/a molecular distillation waste lubricant project of Dongying Guo'an Chemical, and the 100,000 t/a recycled waste lubricant project of HuZhou Hui Yuan PetroChemical. With China's effective implementation of waste lubricant regulatory policy, upgrading production technology and the commissioning of waste lubricant regeneration projects, the recycled waste lubricant is estimated to account for roughly 15%-20% of the total lubricant consumption in China by 2015.
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