“Lubricants market will grow with transition towards high-performance synthetic base stock,” says Jayanta Ray General Manager – Industrial and OEM, GS Caltex.

As we begin to see shoots of normalcy return to the economy while recovering from the pandemic and being wary of a third wave, we caught up with Jayanta Ray, General Manager – Industrial and OEM, GS Caltex, to get a lubricants’ industry perspective on how the industry managed the challenges that came its way during the pandemic and how GS Caltex placed to take on the megatrends in the lubricant industry.

What are the present trends in the lubricants sector in India? What are the key growth drivers?

India still remains one of the fastest-growing lubricant markets in the world despite being hit hard by two waves of COVID-19 in 2020 and 2021 with estimated demand of 2.8 kilotonnes of finished products. Growth is one of the key drivers in the automotive segment for last 5 years, but it witnessed a slowdown owing to a pause in the production by OEMs during the 2020 lockdown. Several other sectors were impacted badly during 2020-2021 which has estimated to fuel a contraction in automotive segment by 20 percent. However, for Industrial segment, the impact was lessened as few essential sectors like power, mining, manufacturing were still operating during lock down. The major segments which supported Industrial Lubricants demand were construction, infrastructure, mining, power, textiles and general manufacturing due to several government policies helping business continuity in these spaces. 

The two main factors impacting Lubricants trend are emission norms and improvement in vehicle efficiency. Moving to BS VI regime called for hardware changes and introduction of lower viscosity engine oils as well as transmission oils. There is also increasing usage trend in synthetic base stocks for manufacturing high-performance lubricants for more sustainable solutions.

How do you evaluate recovery in the lubricants market in Indian industries?

Indian Lubricant industry showed a tremendous resilience from the COVID-19 situation and back to its growth trend as vaccination has caught pace in last quarter. Several factors helped India overcome this crisis and move towards normalcy. Automotive segment which accounts to almost 55 percent market in India is expected to have good growth during upcoming festive season with increased mobility in coming quarters. Going forward, the ‘New Vehicle Scrappage Policy’ is expected to come to effect from April 2023, which will further boost demand for automotive vehicles, paving way for the lubricant players. Industrial lubricants growth and recovery in future will be supported by key government initiatives in manufacturing. Mining and infrastructure sectors and are expected to remain between 2-3 percent in coming year.

What are the challenges faced in the oil and gas sector amid the price volatility in India? How are you dealing with it?

Last few quarters were unprecedented for Lubricant industry where it witnessed tremendous rise in inputs costs more than 40-50 percent mainly due to sudden implications from both supply side issues as well as demand side factors.

On the supply side, refinery shutdown escalated short supply of base oils, bright stock and other hydrocarbon products in Asian market. Huge rise in spot market rates for base oils along with bright stock to remain short in first two quarters of 2021. Also shipping industry outage in recent months pushed prices almost 3 times in sea-freight along with higher lead time. India is short in both crude and base oils and depends mostly on import which aggravated the situation further.

On the demand side crude oil moved above $ 70/Tonne and is likely to rise further in next few months as predicted by many CEOs of Fortune 500 companies. Asia, along with India is witnessing strong recovery pushing the demand for base oils and other petrochemical products including additives. Fuel prices being at an all-time high in last eight years has impacted transportation costs. Steel, plastic and other packaging material also witnessed a significant increase in recent times.

However, GS Caltex (a JV between Chevron USA and GS Energy South Korea) is an integrated Fortune 500 oil company with one of the world’s largest single site refinery in Yeosu, Korea, and have secured high-quality KIXX LUBO Base Oils for our Indian customers in abundance. Hence, GS Caltex customers are fully secured of its supply, and we stand by for support to our customers at this crucial time.  

In past few months not just our partner customers and distributors have benefited from our reliable service but they supported in our accelerated growth journey in Indian market.

How do you assess the growth prospects for the next 5 years in the lubricants market?

As the industry shifts to a more sustainable way of operating, we can anticipate rapid changes ahead. New energy systems, new powertrains, new fuels and new materials will all demand new solutions from the Lubricants players. This indicates emergence of high-performance lubricants in synthetic category gaining pace more than ever before. Also, with rise in EV, the lubricants’ market growth is expected to slow down in developed countries where adoption rates are faster. Hence one market research predicts CAGR growth of around 1.5-2 percent, depending on U.S., Europe and Asia for lubricants industry in next five years.

It is understood that India would attain its normal GDP growth of 6.5-7 percent as per IMF predictions from 2023. These predictions are lower than historical highs but builds in the hope of a continued demand growth in the finished lubricant market. However, due to a transition towards high performance synthetic lubricant quality with higher drain intervals, the market outlook in value terms will be more important than the market outlook in volumetric terms.