On June 29, 2015, Shell launched the eighth world-class lubricants blending plant in China. In recent years, influenced by the low international oil prices, oil companies have tightened their investment, why did Shell continue to increase investment in China, and how will the future lube oil market develop?
Low international oil prices and future development of the lubricant market
I. The international oil price is low and there is pressure and motivation
In recent years, the decline in international oil prices has had a huge impact on oil companies. The slowdown in economic growth is facing a certain challenge in the lubricants market. But overall, although China’s economic growth rate is not as fast as in previous years, it is basically Maintaining a slow growth of about 7%, this growth rate is still relatively prominent in the global context. From historical experience, the growth of the lube market matches the growth of gross domestic product (GDP). As long as China's economy continues to grow, then the fundamentals for the development of China's lubricants market are positive. Shell company believes that "China's lubricant market still has a lot of room for growth. Low oil prices are not entirely a bad thing. It can stimulate economic growth to a certain extent, thereby further enhancing the quality and development of the lubricant market."
II. The Prosperous Development of China's Automobile Industry Provides Support for the Development of the Lubricant Industry
The vigorous development of China's auto industry has provided strong confidence support for lubricants businesses. According to the data released by the Traffic Management Bureau of the Ministry of Public Security, by the end of 2014, the number of motor vehicles in China had reached 264 million. In 2014, the scale of China’s auto aftermarket reached 600 billion yuan, an increase of 30% year-on-year. The use of oil-based car maintenance oil products accounted for more than 80% of auto parts consumption. The growth rate of vehicle ownership in developed countries in the United States and the United States, in particular, has slowed down significantly in recent years. The overall market is approaching saturation, and the development potential of the lubricant industry in the market is far from the Chinese market. It can be said that the main battlefield between the future lubricant brands will be the Asia Pacific region, and the battlefield center will undoubtedly be China.
3. China is expected to become the largest market for lube oil demand
According to Kline & Company's research data, the demand for China's lubricants market has accounted for 46% of the demand for lubricants in the Asia-Pacific region, while Asia-Pacific lubricants market demand accounts for 43% of global demand. In other words, nearly one-fifth of the world's annual consumption of lubricants is digested by the Chinese market. It can be said that China is the growth engine of the global lubricants market. China is now the world's second largest lubricants market after the United States. The industry believes that the Chinese market is expected to exceed the United States in the next two or three years to become the largest market that accounts for one-fifth of global demand.
According to records of Treasure Island, as of July 2015, Shell has a total of eight lubricants blending plants in China, with a total annual production of 1.8 million tons. Despite the overall slowdown in domestic economic growth in recent years, it still maintains a growth rate of about 7%. It still maintains a good momentum of development in the world's major lubricant consumption regions, providing domestic and foreign lubricant companies with development. With broad market prospects, Shell will also have a greater role in China's lubricants market in the future.
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