Kline Forecasts Growth for Bio-lubes

By Will Beverina - December 14, 2022

Bio-lubricant demand in 14 major markets will outpace overall lubricant demand for at least the next
decade, with demand in China, Canada and parts of Europe projected to grow at an even faster pace,
according to new estimates from Kline & Co. consultants.

The company projects bio-lubricants demand in the United States, Canada, Brazil, France, Germany,
Italy, the United Kingdom, the Nordic countries, China and South Korea will grow at a compound annual
rate of 3.5% during the next 10 years, Sharbel Luzuriaga, industry manager in Kline’s energy practice,
said during a webinar on Nov. 8.

His comments were based on a recent Kline study of the same markets, which together account for 53%
of global finished lubricants demand.

Currently, bio-lubricants make up just under 2% of the finished lubricants market. The U.S. leads all
other countries in global consumption, followed by, in order, Germany, South Korea, Canada and China.
By region, North America totals more than half of all bio-lubricant consumption, with European
consumption at over one-quarter and Asia-Pacific ahead of South America.

Still, Kline predicts that bio-lubricant growth will be higher than finished lubricant growth in every
country examined.

In China, the agriculture, forestry, marine and mining industries are expected to lead to further growth,
and demand is particularly strong in state-owned companies. Canada’s mining and construction
segments will help bio-lubricant growth there.

The U.S. market’s marine and power generation industries will help to drive growth of domestic bio-
lubricants. Europe’s increased efforts to become carbon neutral by 2050 will also encourage improving
energy efficiency, circular economy and technological innovation.

By product category, industrial hydraulic fluids make up for over one-quarter of the market, followed by
metalworking fluids, hydraulic tractor fluids, transformer oils and industrial gear oils. Those five
categories account for almost three-fourths of all consumption.

Hydraulic fluids are used in applications operating under high pressures, and accidental spills are
frequent, Luzuriaga said, especially when operating in environmentally sensitive areas.

The marine, wetlands and waterways industry led all others in consumption, followed by power
generation and distribution, then construction and mining. Agriculture, forestry and fishing, ahead of
transportation equipment manufacturing, rounded out the top five.

Those industries all have different needs when choosing to use bio-lubricants. Marines, wetlands and
waterways, for example, of course need a certain benchmark of performance, but making sure they
meet legislative requirements due to environmentally sensitive applications can be an even bigger
driver. The same can be said for the agriculture, forestry and fishing industry.
Most other industries value performance and occupational safety above all else, such as in the general
manufacturing or construction and mining industries. Corporate and social responsibility also plays a
major role in those sectors.

Global oil majors account for over one-quarter of all bio-lubricant production, followed closely but niche
and various other suppliers that specialize in certain industries like agriculture and forestry. Independent
lube blenders come next, followed by specialized manufacturers – which focus on specific applications
like Panolin, a prominent supplier of hydraulic fluids to hydropower plants – with companies that
generally make bio-based products rounding out the top five. Shell agreed to acquire the
environmentally considerate lubricants business of Panolin Group in early November, a transaction
enabling it to increase supply of products with potential exposure to sensitive ecosystems.

There are a few key market developments important to the future of the sector. “Regulatory mandates
are still the most important fundamental force driving demand for bio-lubricants, especially in North
America and Europe,” Luzuriaga said. Those regions are the most progressive in terms of mandates
promoting the use of products with a lower environmental impact.

Third-party certifications also provide an endorsement of sorts for products, sustainability and supply
chains. The Green Award Network, for example, is a certification and incentive program for the shipping
industry.

Cost will always be a major factor in growth. “With certain scalabilities being reached, the difficulty
presented by cost will be reduced,” he said. “But also, more importantly, OEMs are taking a more
proactive role and becoming more open toward the adoption of bio-lubricants, especially in the marine
and off-highway sectors.”