Base Oil Market - Growth, Trends, Covid-19 Impact, And Forecasts (2021 - 2026)

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The Global Base Oil Market size was estimated at around 35 million metric tons in 2020 and the market is projected to register a CAGR of around 2.5% during the forecast period (2021-2026). The market was negatively impacted by COVID-19 in 2020. The declining automotive industry along with the temporary shutdown of automotive manufacturing units and various industrial units due to the pandemic scenario has declined the consumption of engine oil, gear oils, greases, and metalworking fluid, thus creating a negative impact on the demand of base oil.

- Over the short term, the major factor driving the growth of the market studied is rapid industrialization in developing nations considering the industrial application of base oil such as hydraulic fluid and industrial gear oil.
- On the flipside, automobile manufacturers focusing on engine downsizing and extended oil change intervals are likely to hamper the growth of the market studied.
- Group I segment dominated the market, but it is likely to decline during the forecast period, owing to its replacement by Group II and Group III base oil.
- The expanding ...
... production capabilities of base oils in developing countries are likely to provide opportunities for the market studied during the forecast period.
- Asia-Pacific region is expected to dominate the market and is also likely to witness the highest CAGR during the forecast period.

Key Market Trends
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Engine Oil Segment to Dominate the Market Demand

- The engine oil segment dominates the demand for base oil, due to the growing demand for engine oil from industries, such as automotive, power, heavy equipment, metalworking, chemicals, and others.
- Engine oils are widely used to lubricate internal combustion engines and are composed of 75-90% base oils and 10-25% additives.
- They are typically used for applications, such as wear reduction, corrosion protection, and smooth operation of the engine internals. They function by creating a thin film between the moving parts, for enhancing heat transfer and reducing tension during the contact of parts.
- The automotive industry stands to be the largest consumer of engine oil. Currently, high-mileage engine oils are in demand in the automotive industry, owing to the properties that help in oil leak prevention and reduction in oil-burn offs.
- Up to Q3 of 2019, about 67.47 million vehicles were produced globally and has reached about 52 million vehicles up to Q3 of 2020, registering a decline rate of about 23%, thus led to a decrease in the demand for engine oils, which in turn negatively impacted the market growth of base oil.
- Most light and heavy vehicle diesel and gasoline engines use 10W40 and 15W40 viscosity grade oils, globally. As of Q3 2019, about 15.37 million light commercial vehicles were produced globally and has reached about 11.79 million till Q3 2020, registering a decline rate of about 23.2%, thus led to a decrease in the demand for engine oils, which in turn negatively impacted the market growth of base oil.
- Therefore, the aforementioned factors are expected to show significant impact on the base oil market in the coming years.

Asia-Pacific Region to Dominate the Market

- The Asia-Pacific region dominated the global market share. The growing industrial sector due to rising investments in the region by multinational companies, and high demand for gear oil, grease, etc., from industries, such as heavy equipment, power, and metalworking, are some of the key drivers for the base oil market in the region.
- China, the world's largest automotive producer, is majorly focusing on increasing the production and sale of electric vehicles in the country. As of Q3 2019, China had produced 18.17 million vehicles and reached 16.96 million vehicles by Q3 2020, registering a decline rate of about 6.66%, which in turn negatively impacted the demand for the regional base oil market.
- Besides, countries such as India, Indonesia, Malaysia, and Thailand have also been witnessing decline in the production of vehicles in the region as of third quarter of 2020. Hence, all such trends in the automotive industry in the region is expected to show significant impact on the base oil market in the coming years.
- As of Q3 2019, India had produced 3.5 million vehicles and reached 2.16 million vehicles by Q3 2020, registering a decline rate of about 38%, which in turn negatively impacted the demand for the regional base oil market.
- In addition, growing investments in the construction sector are anticipated to boost the demand for lubricants used in construction activities and in heavy equipment.
- Countries, such as India, China, Philippines, Vietnam, and Indonesia, have been witnessing growth in the construction industry considering the post-COVID scenario. Investments in residential and commercial construction in these countries have been increasing at a robust rate. This is further expected to increase the demand for base oil in construction applications in the coming years.
- Therefore, the aforementioned factors are expected to show significant impact on the base oil market in the coming years.

Competitive Landscape

The base oil market is a highly fragmented market, where numerous players hold insignificant shares to affect the market dynamics individually. Some of the noticeable players in the market include Exxon Mobil Corporation, Royal Dutch Shell plc, China Petroleum & Chemical Corporation, Evonik Industries AG, and Chevron Corporation, among others.

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