ARIAL OIL customers: position on the engine oil market in Europe

 

Dear customer,

It was as far back as in April when we last informed you about the market conditions, so this is a good time to look back at the past six months and let you know what developments we expect in the time to come.

Review

The situation has been more stable and calm in the raw materials market during the summer period. The availability of base oil and additives was more in line with market demand. In particular, the Group I base oil grades were more readily available, and most additive suppliers were reasonably able to supply the required volume, despite the logistical and raw material challenges that remained at the time. Given this less volatile situation, we have also been able to bring our temporary price and delivery conditions back to normal.

After the summer period, we are seeing yet another change. The demand for motor oils has increased, and at the same time there has been a shortage of additive components. This deficit was caused by:
Last winter’s extremely cold weather in the USA, which caused major shutdowns and consequential losses. As a result, production capacity has still not returned to the desired level.

A shortage of road and waterway transport, causing long intercontinental and continental delays.
The closure of some chemical plants due to the drastic increase in energy prices.

Global mobility has not yet been fully restored, so many of the refineries that provide the feed stock for the chemical industry are not yet running at maximum capacity. This phenomenon also continues to affect the availability of certain base oils.

These additive availability problems are forcing up prices and leading to much longer delivery times. Unfortunately, the situation concerning base oils and packaging has not yet returned to its former level either.

Outlook

We are therefore looking at another very challenging period. The main additive suppliers expect to continue to face delivery problems until Q1 2022, with force majeure being claimed related to the demand. Some suppliers are even talking about allocations for certain additives until Q2 2022.
There are also expected to be shortages of some GR III base oils soon.

An additional consequence of the limited availability of additives is that prices are again moving in a direction that we would prefer not to see. The additive suppliers have again announced or already carried through price increases. Unfortunately, we are forced to pass on these price increases in the new prices for the end products.

Quality

In recent months we have come across some SAE 5W30 performance products in the market which, in our opinion, have been priced unfeasibly in view of the stated specifications.

Our laboratory technicians have tested samples of these products, and we have also had such a test carried out by an external laboratory that has confirmed our worrying suspicions.

Specifically, we are seeing that the SAE 5W30 products with the API C3 specification or with a performance or ‘suitable for use’ claim for the VW 50400/507.00 do not always meet the minimum requirements for the general viscometrics or other standard analysis values (also taking into account the margins of reproducibility). This could indicate low additive levels.
At least GR III base oils should be used for these products, but the test results suggest that GR II base oils are also being used.

The limited availability of raw materials may have prompted the market to develop formulas that transgress the outer limits to meet the market demand.

We are very concerned about this development and would like to spare you potential complaints or spot checks by inspecting authorities with the above results.

ARIAL OIL stands for Quality, Reliability and Service. We are happy to be of service if you have any questions or concerns about the quality of products on the market. Do not hesitate to contact your account manager.

To conclude

We will continue to do our utmost to deliver your orders as well and completely as possible, and we wish you every commercial success as the year approaches its end.