Lubricants in Pakistan

Pakistan is a very lucrative and vibrant market for lubricant producers as the consumption patterns have been on a steady high in the recent past especially because of the ever growing number of vehicles and the massive demand of power generators in Pakistan. Such is the demand that the number of exiting lubricant procures do not produce enough products to cater for the local market demand.

The existing map in meeting the local increasing demand has left a yawning gap which has allowed some of the world’s top lubricant producer to enter the Pakistan market which is often considered the most lucrative and profitable in the POL category.

The overall demand of lubricant products in Pakistan stands around 300,000 liters, only half of which is met through local production. The other half is inevitably filled through imports from various parts of the world. And the demand has not been stagnant and indeed has witnessed a sharp surge in the recent past, making the market more competitive with every passing day.

Moreover power sector is an important contributor towards the lubricant demand, other than the automobile industry. With the power sector reforms likely to take shape in the near term and a large number of IPPs to be added to the national grid, the demand is expected to increase at a rapid pace going forwards, making more room for the other big players from around the world to increase and strengthen their presence in Pakistan’s high demand market.

Not everything is rosy about the lubricant business though, as the local procurers often cite the import tariffs and smuggling of lubes as two major loopholes in the system, which need to be addressed on priority basis, if the lubricant industry is to be strengthened.

Lubricant sales in FY10 by and large remained flat when compared to the corresponding period last year, registering a meager growth of 0.88 percent. There was not a significant change in the sales mix either, as the market share gradient remained virtually unchanged in comparison to FY09 with SPL having the lion’s share of 27 percent, closely followed by CPL and PSO at 19 and 17 percent respectively, in the domestic lubricant market off-take.

Heavy duty truck and long route automobiles remained the core to lubricant sales as Heavy Duty Engine Oil remained the highest volume lube variant in the product basket claiming 41 percent market share, according to the latest statistics revealed by the Oil Companies Advisory Committee (OCAC). Passenger Car Motors Oil followed with identical share of 22 op percent each, not much different to the previous year’s numbers.

A vertical analysis of the company marker share provided by the OCAC shows a considerable jump in Pakistan state Oil’s (PSO) market share, which dipped by 200 and 300 basis points, respectively.

Domestic lube products continued to dominate the market as, evident by an overwhelming share of 98 percent in the allover ales, while the other 2 percent gap was filled by imported lubes.

National Refinery Limited, being the only domestic base oil source, produced 177,916 tons of lubes during FY10, which was nearly 7 percent higher than the corresponding period last year.

Industrial lubricant oil is the fastest growing sub segment within the lubes industry, with the segment sales reaching 40672 tons during FY10, nearing Passenger Car Motor Oil.

With the level of projected expansion in the power and electricity generation, it is tipped to go beyond the passenger cars segment in no time.

The current status of the total number of blending plants in Pakistan has reached to 42, in addition to 27 reclamation plants, according to the OCAC report.

The industry players are optimistic about the future as lubricant business is considered a high margin business and often acts as the savior for refineries, who otherwise have very low profit margins on other products. In fact, having lube in the product arm is an advantage that others in industry crave for. The industry demand is only seen going p in the coming few years, so it is al good for the lube makers.