Group I basestocks are continuing their long-term decline primarily due to technical obsolescence for automotive applications. The impending scarcity of Group I provides opportunity for other products like naphthenics in metalworking fluids, process oils, and rubber oils and is abetted by a supply push from Group II suppliers. George Morvey, Kline's Energy Practice project-manager, cautions, "While Group II penetration into automotive formulations is happening relatively quickly given the sector's fewer product variations, penetration into industrial applications is likely to be slower as there are many more product categories with small individual volumes; so the payback period for converting an application to Group II is longer."Strong pre-recession basestock prices have rendered re-refining a more compelling economic argument and combined with new regulations in Europe and increasingly in North America, the use of re-refined basestocks is encouraged. However, logistic issues and a lack of consumer conviction remain obstacles to their greater acceptance. Globally, supply of re-refined basestocks is projected to grow at over 6% per year to exceed 3 million tonnes by 2021.
Lubricant Demand Growth Stalls In Mature Markets, Strong Growth On The Horizon For New Emerging Markets, Sees Kline
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts