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Integration is Key to Success in U.S. Synthetic Lubricant Base Stock Market - The U.S synthetic lubricant base stock market faces serious margin pressure, as rising crude prices cause a surge in the price of raw materials
Integration is Key to Success in U.S. Synthetic Lubricant Base Stock Market

 

NewswireToday - /newswire/ - Palo Alto, CA, United States, 2008/06/30 - The U.S synthetic lubricant base stock market faces serious margin pressure, as rising crude prices cause a surge in the price of raw materials.

   
 
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With this, strategies such as integration and mergers and acquisitions could help manufacturers combat the margin crunch and competition from low-cost mineral oil lubricants.

New analysis from Frost & Sullivan (chemicals.frost.com), The U.S. Synthetic Lubricant Base Stock Markets, finds the market earned revenues of $901.2 million in 2007 and estimates this to reach $1.28 billion in 2014.

If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants with an overview of the U.S synthetic lubricant base stock markets, then send an email to Johanna Haynes, Corporate Communications, at jhaynes_pr[.]frost.com with the following information: your full name, company name, title, company telephone number, company email address, city, state, and country. We will send you the information via email upon receipt of the above information. All media inquiries please reply directly to johanna.haynes[.]frost.com.

"The growth of U.S. synthetic lubricant base stock markets is mainly driven by high-performance applications that require high viscosity indexes, higher flash points, lower pour points, and very low volatility," notes Frost & Sullivan Research Analyst K. Lakshminarayanan. "These requirements make synthetic lubricants valuable blending components when compounding for extreme service at both high and low temperatures."

Unlike mineral oil lubricants, synthetic lubricants are produced from polymerization techniques, and their properties are dependent on the nature of monomers and the molecular weight of the polymeric chain. Hence, these variables can be altered according to needs like excellent heat control, wear resistance, and energy efficiency for high-performance applications. Other benefits of synthetic lubricants include reduced operating costs, excellent fuel efficiency, improved equipment durability, and extended drain intervals.

Soaring crude oil prices, along with competition from mineral oil lubricants, prove to be major challenges for the synthetic lubricant base stocks. While mineral oil-based lubricants already account for about 95 percent of the total lubricant market, a new type of base stock, Gas to Liquid (GTL), expects to emerge as a major threat to synthetic lubricants.

"In addition to being less expensive, GTL lubricants are completely saturated, less volatile, and devoid of nitrogen, sulfur and aromatics," says Lakshminarayanan. "These qualities are likely to make them a preferred lubricant base stock in the coming years."

To overcome these challenges, companies must expand their capacity, integrate vertically, merge, or acquire competitors in the market. Exxon Mobil has integrated vertically and can have a check on the price of the final product. Similarly, Ineos acquired BP Amoco. Chemtura acquired lubricant manufacturers such as Anderol, as well as base stock manufacturers such as Hatco Corporation, Uniroyal and Great Lakes Corporation. Akzo Nobel sold its phosphate esters to Supresta, and soon thereafter, Israel Chemicals Limited acquired Supresta. Private equity investors also enter into the market. They buy companies which are experiencing losses, consolidate and make them profitable. Recently, Chemtura is speaking with private equity firms like Apollo and Blackstone for the buyout.

This trend is expected to happen in the future, especially in the case wherein the company lacks vertical integration with respect to the production of raw materials. Otherwise, these companies may face profit margin squeeze.

Because of increase in prices in coming years, companies will consider the usage of synthetic lubricants as a last option. This is mainly because of the price competitiveness from other categories such as mineral oils or GTL lubricants.

The U.S Synthetic Lubricant Base Stock Markets is part of the Chemicals & Materials Growth Partnership Service program, which also includes research in the following markets: Successful Green Growth Strategies in the Personal Care Specialty Chemical Market, U.S. Fluoropolymers Markets, U.S. Industrial Enzymes, North American Rigid Food Packaging Market, and North American Pulp and Paper Chemicals Market. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants. Interviews with the press are available.

Frost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company's TEAM Research, Growth Consulting and Growth Team Membership™ empower clients to create a growth-focused culture that generates, evaluates and implements effective growth strategies. Frost & Sullivan employs over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 30 offices on six continents.

The U.S Synthetic Lubricants Base Stock Market - N33C

 
 
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Integration is Key to Success in U.S. Synthetic Lubricant Base Stock Market

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