Looking Back at the 2011 Lubricant Market: Green Lubrication Has a Long Way to Go

For the automotive and lubricant markets, 2011 was destined to be an unforgettable year. In the year now ending, China's auto market entered its lowest growth rate in more than a decade, and this quickly affected the lubricant industry. By October 2011, China's lubricant output was 6.829 million tonnes, up 8.8 percent year on year, far from the 13 percent growth rate of 2010. Industry insiders analyze that in the coming years the lubricant industry, accustomed to rapid growth, will have to face fluctuations and adjustments, and among these adjustments the most striking is undoubtedly the industry-wide trend toward green transformation.

Rational lubrication becomes the general trend of industry development
In November 2011, the 12th China International Lubricants and Application Technology Exhibition opened grandly at the China International Exhibition Center in Beijing, and a summit forum on the development of the lubricant industry was held at the same time under the theme of innovating industrial technology and driving green lubrication. Experts attending the forum said that the reason this forum took green lubrication as its theme is that the lubricant industry, after ten years of rapid growth, is facing a huge turning point.

Over the past decade, China's lubricant industry has boomed in both production and sales, but at the same time domestic waste caused by irrational lubrication has been alarming, and lubricants are over-consumed. According to figures disclosed by relevant media, China consumes more than 15 percent of the world's lubricants with around 10 percent of the world's GDP. As early as last year, China's apparent lubricant consumption had already reached 25 percent of the world's total, and relevant experts estimate that in 2011 actual lubricant consumption will exceed seven million tonnes, still rising steadily although the growth rate has declined.

Regarding this situation, Liao Guoqin, General Manager of PetroChina Lubricant Company, pointed out bluntly that the lubrication concepts and methods of the entire industry need to be adjusted. Experts say that the key to achieving green transformation lies in changing consumers' lubrication concepts and methods and achieving rational lubrication. Because China has only just formally entered the automobile society, many people do not pay enough attention to vehicle lubrication and maintenance and blindly choose lubricants, causing much unnecessary waste and loss. Actively learning about lubrication and maintenance has become a necessary task for Chinese car owners. For lubricant manufacturers, with the growth of total market volume slowing, improving the level of lubrication and achieving growth by replacing quantity with quality will become the best choice for their development.

Independent innovation is the only real path
As early as last year, industry media began to predict that SN-grade lubricants would come onto the market in 2011. In 2010, the American Petroleum Institute began to accept SN engine oil certification worldwide. SN oils offer better fuel economy and stability and better fit the low-carbon, energy-saving development trend of the automotive industry, so their launch was eagerly awaited. Sure enough, in 2011 many major brands launched SN-grade lubricants. However, to everyone's surprise, many small and medium-sized domestic national brands also took the opportunity to launch new SN-grade oils. Industry insiders reveal that although SN-grade lubricants have sprung up like mushrooms, the SN oils launched by many brands are mostly made with purchased foreign additive packages. This problem has in fact existed for a long time: apart from the national brand giants, it is hard to say that the many growing small and medium-sized brands possess the core competitiveness of independent innovation.

For domestic lubricant brands, independent innovation is the eternal and only real path. In 2011, well-known domestic lubricant brands stepped up their independent innovation and R&D efforts. Kunlun Lubricant clearly set out its research plan for the Twelfth Five-Year Plan period and new goals for scientific and technological development for a period to come, stating that core technologies should be formed as quickly as possible in several professional fields, ensuring that scientific research results are applied for one generation, researched for another and reserved for a third, so that the lubricant business can develop sustainably and lead the overall oil-use level of related industries. In addition, Kunlun Lubricant signed a strategic cooperation agreement with Shanghai Jiao Tong University to jointly build a joint laboratory for gasoline engine oil research, targeting the R&D of lubricants for new energy vehicles (electric vehicles). Industry insiders analyze that the continuously strengthened independent innovation efforts of well-known domestic lubricant brands with strong technology will greatly advance the technological advantages of national brands and further strengthen the market competitiveness of national brand products.

The demand for market diversity remains obvious
In the lubricant industry, the high-end market has always been a battleground for many manufacturers because of its rich profits, with foreign brands and national brand giants as the main competitors. At the 12th China International Lubricants and Application Technology Exhibition, which concluded in November 2011, a large number of foreign brands from Russia, Germany, South Korea and other countries appeared at the exhibition. Our reporter found that these companies had all just entered the domestic market in 2011 and invariably targeted the high-end lubricant market. As a leading foreign brand, Shell kept increasing its investment in China in 2011, expanding lubricant capacity. National brands were not to be outdone either and kept gathering strength in the high-end market, successfully winning back part of the high-grade lubricant market that had long been occupied by foreign brands, reducing the share of foreign companies in the high-grade lubricant market from the original 80 percent to the current 60 percent.

In recent years, China's lubricant market has grown strongly and become the growth engine of the world's lubricant industry, and the core driving force is precisely the continuous emergence of high-end products. Because the profits of high-end products are several times or even more than ten times those of low-end products, almost all capable lubricant manufacturers are playing the high-end card. However, for the huge Chinese market, the demand for market diversity remains obvious, and domestic brands, especially the lubricant giants, still carry the burden of meeting the diversified demand of the market and supplying oils for many mid-range and low-end vehicles and industrial machinery. For China's lubricant industry, while chasing the high end it must also pay attention to the real diversified market demand and to the affordability of consumers, and it remains important to take account of the mid-range and low-end while developing high-end products.

In 2011, after ending ten years of rapid growth, the lubricant industry reached a turning point of green transformation. For the growing Chinese lubricant market, in the coming years rational lubrication and green development will become an urgent problem for the industry to solve. Local brands such as Kunlun Lubricant are also continuously adjusting their corporate development strategies and leading the whole industry and consumers to adjust lubrication concepts and methods. China's lubricant market is moving toward the trend of slower growth through rational lubrication seen in developed-country lubricant markets. The road ahead is long and arduous; for this huge market, truly achieving rational lubrication still requires the joint efforts of industry authorities, lubricant manufacturers and consumers.