TREND: Lubricant sales up as wheels of econ activity start turning

Friday, Oct 30, 2020


By Sukalp Sharma


NEW DELHI – After being hit hard by COVID-19 and the stringent nationwide lockdown in its wake, India's lubricants industry appears to have bounced back rather well, riding on the back of a recovery in demand from the automobile sector and other consuming industries.


Recent data point to higher demand for lubricants and greases not just sequentially, but on year as well, firming up the industry's belief that the worst is over in terms of the pandemic's impact.


India's consumption of lubricants and greases jumped 74.1% on quarter to 999,000 tn in Jul-Sep, government data showed. As was the case with most other petroleum products, lubricant consumption in Apr-Jun had crashed to just 574,000 tn due to the stringent nationwide lockdown for a large chunk of the quarter. On an on-year basis, consumption was up 7.9% in Jul-Sep.


In September alone, the country's consumption of lubricants and greases rose 11.6% on year and 8.1% sequentially to 346,000 tn.


Major players in the segment are hopeful of further improvement in demand in the near future, even as the pace of growth may moderate, given that the initial recovery has been driven in part by pent-up demand. These expectations, however, are based on assumptions that there will be no more stringent lockdowns and that he recovery in key consuming industries will stay on course.


"A part of the demand recovery in lubes is because of demand that was pent up, so we do not expect very high rates of growth to be sustained. But the demand outlook for the segment appears positive going forward, and we are cautiously optimistic," said a top executive with the country's largest lubricant marketer Hindustan Petroleum Corp Ltd.


In its latest annual report, Gulf Oil Lubricants Ltd said pent-up demand in the system would continue to spur volumes in the medium term. Beyond that, the scenario would depend to a large extent on how the evolving pandemic situation impacts the economy.


The HPCL executive said the recovery in demand from the automobile sector–from manufacturers as well as vehicle owners–has helped significantly. Within the sector, the passenger vehicle, two-wheeler, and tractor segments have been the key drivers of recovery in demand for lubricants.


"Personal vehicle use has gone up due to COVID-19, which has helped lubricant demand both in terms of new vehicles and higher use of existing vehicles. Agricultural activity, too, has seen an uptick despite the pandemic, resulting in a spurt in new tractor sales," said the official.


Demand for industrial lubricants and greases has also seen a fast recovery, with manufacturing industries and heavy machinery segments moving rapidly towards normalisation of operations following the easing of the lockdown, said an official with the state-owned BPCL.


"Trends in major industrial segments, along with the trajectory auto sector demand takes, will be key monitorables with regard to lubricant demand. The worst is behind us, and we are hopeful that demand will improve further, but cannot be certain given the current circumstances," said the BPCL official.


The current size of the lubricants market in India is pegged at over 350 bln rupees, with annual consumption of over 3.6 mln tn. Industrial lubes account for roughly 55-60% of the market, while automobile lubes make up the rest. Public sector oil marketing companies HPCL, BPCL, and Indian Oil Corp Ltd have a combined market share of around 50%. Major lubricant players in the private sector include the likes of Castrol India Ltd and Gulf Oil Lubricants India Ltd.


Shares of Gulf Oil and Castrol India, which have lubricants as the primary business, have seen substantial gains over the past few months compared to those of the public sector oil marketing companies, for which lubricants are not a major business segment despite their large market share.


So far this financial year, Gulf Oil's share price has appreciated around 28% and shares of Castrol India have gained around 15%. On the other hand, shares of BPCL have gained a little over 11%, while those of IOC and HPCL have lost about 2%.  End


Edited by Mainak Moitra


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