PRESS RELEASE
Posted on February 27, 2023
The bio-based oils market is expected to grow at a CAGR of 25.1% during the forecast period (2022-2030).
BASE OIL MARKET DYNAMICS:
The increase in the use of base oils in the automotive sector is one of the main drivers of the global bio-based oils market. However, the high cost of raw materials could be a major market constraint.
The increase in the use of basic oils in the automotive sector
The growing demand for high quality base oils for the automotive industry is expected to drive the growth of the base oils market in the coming years. The growing demand for motor oils and lubricating greases compatible with fast-moving parts and high temperatures is driven by advances in engine technology. In addition, these motor oils maintain viscosity, reduce engine wear and help ensure reliability because they are made with a high-quality base oil and best-in-class additive technology. Hence, the increasing utilization of base oils in the automotive industry is estimated to drive the market growth.
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In addition, increasing adoption of Group II and Group III base oils along with rapid industrialization across the globe is further driving the growth of the base oil market. Growing applications from developing economies and emerging markets drive market value growth. Base oils such as Groups II and III are suitable for use in lubricant formulations for automatic transmission engines, heavy trucks and passenger cars, and several properties of Group II and III base oils are expected to drive the market growth. Thus, the rapid growth of the automotive industry, revenue and launches and demand for automotive products increases the demand for base oils for higher efficiency, which adds to the growth of the market.
For example, according to Carsurance, the Volkswagen Group had the highest revenue in the auto industry in 2019, $278.34 billion. For example, in 2020, according to Carsurance, US motor vehicle and parts retail revenue was US$1.25 trillion, and in 2030, the global auto industry revenue will reach almost US$9 trillion
High cost of raw materials
Vegetable oils are composed of triglycerides derived from plants; although plant parts can yield oil, for commercial practices, vegetable oil is essentially derived from the seeds. The costs associated with the manufacture of base oils depend mainly on the availability of raw material, the type of raw material, the methods and strict measures used for extraction and the intended use of the plant for the production of oil based
Additionally, biofuels guidelines have resulted in a lack of accessibility to soybean and rapeseed oil in the US and Europe for food and other industrial applications. Moreover, the consequent high prices of these major sources of vegetable oils have resulted in shortage of working capital and may hamper the growth of the market.
ANALYSIS OF THE IMPACT OF COVID-19 ON THE BASE OIL MARKET:
The recent coronavirus outbreak had a negative impact on the bio-based oil market. The COVID-19 pandemic has hurt the crude oil market by reducing excess consumption of refined petroleum products and slowing economic development due to various global lockdown measures.
The complete government-imposed lockdown of several countries around the world during the pandemic has led to supply chain disruptions that significantly hampered the sourcing of raw materials. In addition, factors such as the temporary shutdown of production facilities, declining labor participation and withdrawal of investments, followed by social distancing rules, have adversely affected the market. Additionally, the COVID-19 pandemic has halted more than 80% of US auto production. Moreover, there is a similar situation in Europe and Asia Pacific, as the demand for automobiles and commercial vehicles experienced declining growth, thus hampering the overall growth of the market.
In addition, the industrial sector has changed dramatically since December 2019 due to the COVID-19 pandemic, which has caused extreme economic uncertainty and the first signs of a global economic downturn are visible in countries severely affected by the contagion. The market is expected to continue growing at the same rate as pre-pandemic levels. Also, suspended and canceled operations will continue and as a result the market is estimated to expand and as a result the market will prosper during the forecast period.
BASE OILS MARKET SEGMENT ANALYSIS:
The global bio-based oil market is classified on the basis of type, application, and region.
The extensive expansion of the automotive sector provided a lucrative demand for the automotive oils market, enabling the respective segment to dominate the application segment of the global bio-based oils market.
In order to reduce the friction between the parts of the engine assembly and the transmission, automotive oil is used in the transmission chamber and engine of the vehicle. The secondary purpose of engine oil is to maintain the temperature of the engine chamber and prevent oxidation from rusting the engine parts. These oils are made from petroleum that has undergone additional processing to improve the quality of the motor oil. One of the key factors driving the growth of the automotive oil market is the global expansion of the automotive industry. Spark plugs are widely used in electrical, marine and aerospace applications, which benefits the market. The market is also influenced by the increased demand for conventional oil, which is more in demand because it is less expensive than modern lubricants. The popularity of synthetic lubricants can be attributed to their superior performance and better long-lasting protection. The automotive oil market is also benefiting from the growth in the automotive industry, increasing investments, and increasing disposable income.
Motor oils, frequently used to lubricate internal combustion engines, are mainly composed of base oils (75%–90%) and additives (10%–25%). These additives are widely used in the automotive and other transportation sectors worldwide. Using engine oil has three main benefits: improved engine performance, corrosion protection and reduced wear. In order to improve heat transfer and reduce stress when moving parts come into contact, these oils work by forming a thin layer between them.
The market is being driven by the rapid expansion of automobile production worldwide due to high demand for affordable and fuel-efficient vehicles and advancements in automotive technology. The International Organization of Motor Vehicle Manufacturers (OICA) estimates that by 2021, car production will increase by 3% in China, 12% in Brazil, 30% in India and 4% in the US . In 2021, vehicle sales were highest in major regions of the world. . China maintained its position as the world’s largest and best-performing single-country auto market, with sales up 6.6% to more than 21 million vehicles. FUCHS expanded its specialty business in June 2021 by acquiring the lubricants division of Gleitmo Technik AB. Its acquisition would increase the company’s customer base, product line and market expansion. A partnership for industrial lubricants was established in Australia under the terms of the MoU, which was signed in November 2020 with PT Pertamina.
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GEOGRAPHICAL ANALYSIS OF THE BASE OIL MARKET:
Population expansion, rising disposable income, increased investment in the region’s various industrial sectors, and the expansion of the automotive and energy industries increase demand and sales of bio-based oils in Asia and the Pacific.
As the largest vehicle production center, Asia Pacific is expected to be the fastest growing area in terms of consumers. In addition, countries such as China, India, Indonesia and Thailand are increasingly manufacturing and exporting passenger cars and other vehicles to developed regions, boosting the bio-based oil market. According to the International Organization of Automobile Manufacturers (OICA), the country will produce more than 25.22 million cars and commercial vehicles in 2020, growing to more than 26.08 million units the following year.
Due to favorable government regulations and cheap labor, the relocation of manufacturing operations to Asian countries is expected to increase vehicle spending and industrialization. In addition, a shift towards more sustainable and productive automobiles is expected to fuel this market in the region. The International Energy Agency predicts that the country’s oil demand will increase to 2.2 million barrels per day in 2023 from 1.8 million barrels per day in 2022. In addition, there has been huge development in both sales and production of automobiles in China.
Foreign investments, a thriving manufacturing sector due to favorable legislation, a growing middle-class population and rising living standards across APAC contribute significantly to the consumer base. In addition, the largest companies in the region planned to develop bio-based oils as a response to the need of the automotive sectors. For example, on April 8, 2022, Eneos Corp. of Japan announced plans to create bio-based lubricants and greases made from proprietary plant-based oils by 2023.
Newly created base oils include carbon and hydrogen and are used to develop lubricants and other products in Japan. Neste announced on October 19, 2022 that its unique NEXPAO, a high quality synthetic base oil technology, will be deployed at the synthetic base oil production plant of a major petrochemical joint venture Chinese in China. Neste’s Engineering Solutions, a subsidiary of CNOOC, has signed an agreement with CNOOC and Shell Petrochemicals Company Limited, a joint venture between China CNOOC Petrochemicals Investment Company Limited and Shell Nanhai BV, for this purpose. Cosmo Oil Lubricants Co., Ltd. of Japan received Biomass Mark approval for its bio-based diesel engine oil COSMO DIESEL CARBONEUT 10W-30 on June 13, 2022. The new lubricant, consisting of more than 80% derived base oil of plants, is Japan’s first diesel engine oil with the Biomassa Mark certification.
COMPETITIVE LANDSCAPE OF THE BIO BASE OILS MARKET:
The world market for bio-based oil is huge. It is becoming increasingly competitive due to major players such as Total Energies, BP PLC, Shell, Archer Daniels Midland Co., Bunge North America Inc., Cargill, Incorporated, Battelle, Exxon Mobil Corporation, FUCHS, and BioBlend Renewable Resources, LLC. The market is fragmented and market players use market tactics such as mergers, acquisitions, product launches, contributions and collaborations to gain competitive advantage and recognition.
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