Global Used Oil and Re-refined Lubricants

Transcription

1 Global Used Oil and Re-refined Lubricants A presentation at May 23,

2 Introduction This presentation is based on Kline s recently completed survey of the global used oil market and the re-refining industry. The first phase of the study focuses on five key markets: North America, Brazil, Western Europe, Russia, India, and China. The second phase of the study focuses on Indonesia, Thailand, Malaysia, Saudi Arabia, Mexico, South Africa, and Turkey. Each market profile covers: Used oil regulation Used oil material balance in terms of used oil generated, collected, and disposed Various routes to disposal of used oils Major re-refiners of used oil Attractiveness of re-refining business Market trends and outlook Base year for the study is 2015, and forecasts are provided for a five-year and 10-year period. 1

3 Lubricant/Used Oil Life Stages Finished lubricant consumption Converted to used oil Consumed in use Not classified as used oil Used oil not collected Collected used oil Reclaimed Incinerated Combusted Sent to landfill Use as fuel Re-refined Other end-uses 2

4 The six markets covered in this study account for 24.6 million tons or 63% of the global lubricant demand. About 13 million tons of used oil is generated in five of the six markets covered in the study. No estimates of used oil generation in Russia have been made. Kilotonnes 10,000 0 North America-a China Western Europe-b India Russia Brazil Lubricant demand Used oil generated a- Includes the United States, Canada, and Mexico. b- Includes DACH (Germany, Austria, and Switzerland), France, Italy, the United Kingdom, the Benelux, and Iberia. 3

5 Used Oil Collection Rates in North America and Western Europe are among the highest (% of used oil generated) Used Oil Collection Rates by Region, 2015-a China Brazil Average India Western Europe North America 0% 100% a- For Russia, there is no official statistical data on the amount of used oil generated in the country and hence, the collection rate could not be estimated. Kline estimates that about 600 kiltonnes of used oil is collected. 4

6 Regulations, Compliance, Collection efficiency and Material Placement Used oil collection in a region mainly depends on used oil regulations, its enforcement, and the depth and spread of the collection infrastructure. Stricter regulations and its enforcement result in greater collection rates in a region. In the United States, Canada and Western Europe, the enforcement of regulations is better. These regions also have well established collection infrastructure. Further, collection is higher in countries that offer incentives for collection and processing of used oil. For example, in Italy and Spain, an Extended Producer Responsibility (EPR) scheme is applied. The EPR scheme consists of depositrefund system implemented in order to subsidize the industry. The deposit is funded by lubricant producers and the refund is accrued to collectors, re-refiners, and fuel processors depending on the scheme. As a result, the collection rates in the United States, Canada and Europe are higher than 70%. In all markets, most leading re-refiners have a business division or a sister company dedicated to the collection of used oils. These collection companies have a well-established network of collection points, tank farms for the accumulation of used oil in a region, used oil collection trucks, bulk shipment trucks, and rail cars 5

7 Used Oil Disposal Routes Vary Significantly by Different Markets 100% 0% North America-a Western Europe-b China India Russia Brazil Industrial fuel Re-refining Other a- Includes the United States, Canada, and Mexico. b- Includes DACH (Germany, Austria, and Switzerland), France, Italy, the United Kingdom, Benelux, and Iberia. * Other include impregnation of wood blocks, anti-corrosion agent, etc. 6

8 Global Used Oil Disposal It is estimated that around 56% of the collected used oil is processed as industrial fuel. Used oil is treated to remove water and other impurities. The fuel oil may be used as a blend component or used standalone in various applications. About 38% is used in re-refining and the balance is used in minor applications like concrete demolding agents. Used oil that goes for re-refining in a market depends upon two factors: rerefining capacity and enforcement of regulations. The share of re-refining is expected to increase in the disposal route, mainly due to two reasons: better enforcement of regulations and improvement in infrastructure for collection and re-refining in different markets. Consumers and are also becoming more aware about the potential harmful effects of used oil dumping. This will also help in improving the disposal of used oil in an environmentally friendly way. 7

9 Used Oil Collection and Re-refining Outlook by Key Markets % Of total Used Oil Collected share of Finished Lube Demand in Key Markets North America-a Western Europe-b Brazil Russia India China % Of total Re-refining share of Used Oil Collected in Key Markets North America-a Western Europe-b Brazil Russia India China a- Includes the United States, Canada, and Mexico. b- Includes DACH (Germany, Austria, and Switzerland), France, Italy, the United Kingdom, the Benelux, and Iberia. 8

10 Outlook The volume of used oil generated is expected to increase. The growth in generation will be mainly due to usage of better vehicle technology and reduction in losses and spillages. The usage of better technology will lead to fuel efficiency and subsequently, will lead to more generation of used oil. The improvements are mainly expected to come from developing regions as collection infrastructure improves and regulations are enforced more stringently. The awareness about the harmful effects of dumping used oil in the environment is also expected to increase, driving improvements in collection of used oil in different countries. The United States and Canada and Western Europe will witness minor improvement in used oil collection due to a shrinking lubricant demand. China, Thailand, and Mexico are expected to see the most growth in collection as collection by licensed collectors improves during 2015 to In other markets, collection will see slightly slower improvement in used oil collection. 9

11 Country Summary: Russia 2,500 2,000 Lubricant Consumption ( 000Tons) 70 Used Lubricating oil Net Exports/Imports ( 000Tons) 1, , ULO Industry Structure Characteristics ULO Industry Concentration Fragmented. Many small collectors and transportation companies exist. There is a smaller number of regional players, as well as ULO trader/aggregators Key Regulations Federal law #89-FZ and Technical Regulation TR TC 030/2012 Key ULO Collector(s) Vertical Integration Rosa-1, 101 Poligon, Mosecopartner, Ros-util, Intergrin, Oiltrans, Prolain, Etilomin-EK, Otrabotka-maslo Limited. Rosa-1, Russia s only rerefinery, has a wide collection network, but volumes re-refined are small (~30 KTA) relative to ULO burning Classification Used oil is classified as hazardous waste. The regulations define the rules for collection and disposal of used oil. 10

12 Country Summary: Russia s Strengths and Weaknesses Strengths Weaknesses The largest finished lubricant market in Europe in volume terms. New law prohibits dumping of the used oil on ground or water streams; or burning it without removing all heavy additives from it. This has resulted in increasing the necessity of collecting and regenerating used oil. The issue is the lack of re-refining capacity due to which significant quantity of used oil is diverted to fuel applications. The obligatory licensing for collectors introduced in Russia in the beginning of 2016 will play a positive role. No centralized collection system. Generators have to find collectors. Logistical challenging. Access to quality feedstock is limited. Heavy industries in farflung places end up reusing used oil on site or dump it. Lubricant blenders are not interested in rerefining used oils as the base oil market is oversupplied in Russia. DIYers also use used oil for lubricating locks, bicycle chains, and door hinges. Used oil is also used for impregnation of wood blocks to protect it from insects and rot and for metals to protect it from corrosion. 11

13 Opportunities and Challenges for the Global Used Oil Market Re-refiners have established sister companies to collect used oil. It allows them to not only ensure raw material supply but also control the quality of used oil they are receiving. Start premium basestock to remain competitive. Also, integrating inexpensive re-refining API Group I operations along premium basestock production could be viable. European re-refiners have issues acquiring used lubricating oil due to availability. Shipments of used lubricating oil from the U.S. to Europe occurred in the time frame, at a time of high oil prices; these movements are not viable under the present conditions of lower oil prices. Russian collectors could potentially export used oil if the legislation will loosen. Base oil prices decreased at much slower rate than fuel prices leaving base oil re-refiners better off than used lubricating oil processors. 12

14 Thank you for your time. We hope you found this presentation useful and informative. Published Second Quarter 2016 Base Year: 2015 Projections to 2025 Assessment of the North America, South America, West Europe and Asia-Pacific regions. Individual country assessments for China, India, Russia, Indonesia, Thailand, Mexico, Malaysia, Saudi Arabia, South Africa, Turkey and USA Canada. For all subscription related queries, please contact: Global Erin Durham Europe Kristina Zablecke North America Alex Rappley Asia Pierre Zolghadri

15 Kline is a worldwide consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the chemicals, materials, energy, life sciences, and consumer products industries for over 50 years. For more information, visit If you require additional information about the contents of this document or the services that Kline provides, please contact: Americas Asia Europe Gabriel Tarle Senior Analyst, Energy Practice Gabriel.Tarle@KlineGroup.com Kline & Company, Inc. 35 Waterview Blvd. Suite 305 Parsippany, NJ Phone: Fax: