The African lubricants market is expected to register a CAGR of over 2% during the forecast period. Factors such as demand from the expanding wind energy sector and increasing demand from the manufacturing industry are expected to drive the demand for the market studied during the forecast period.
- Increasing drain intervals in the automotive and industrial sectors and the impact of the COVID-19 pandemic are likely to hinder the market’s growth.
- Developments in synthetic and bio-based lubricants and industrial growth in Africa are projected to act as an opportunity for the market in the future.
Key Market Trends
Increasing Demand from the Growing Power Generation Sector (Wind Energy Sector)
- Gear oils find application in wind turbines for the lubrication of the main gearbox and other gear motor components.
- The lubricant requirements in wind turbine gearboxes are more stringent, when compared to other industrial gear oils. This is due to the high temperatures, bearing wear, corrosion and oxidation, and load weights involved during the process of power generation.
- There is an increasing demand for synthetic gear oils in wind turbines, due to their enhanced properties, over their mineral-based counterparts, owing to the performance additives used during the formulation of synthetic oils, as per the requirement.
- Despite facing competition from solar power generation, the wind power sector is expected to continue its growth during the forecast period. This, in turn, is expected to boost the regional demand for gear oil in a significant manner in the future.
- Owing to various factors, such as low cost of electricity production, African countries are focusing on the wind energy generation. Additionally, driven by technological advancements and environmental concerns, the share of wind energy in the energy mix of the region is likely to continue to increase in the years to come.
- The government support, in terms of initiatives and subsides, to promote the renewable energy has been contributing to the growth of the wind energy sector. For instance:
- In April 2018, Tunisia planned to auction 1 GW of solar and wind power projects to promulgate the renewable energy sector. Similarly, in November 2018, Tunisia’s Ministry of Industry and Small and Medium Enterprises prequalified 16 companies and consortia for a 500 MW solar tender and 12 parties for a 300 MW wind auction.
- Unlike its neighbors, Jordan does not have oil and gas reserves. As a result, the country is heavily dependent on fuel imports for its energy needs. Therefore, the country is moving toward green resources to meet the power demands. As a result of this strategy, in the last four years (2014-2018), the installed wind power capacity increased from 1.4 MW to 284.5 MW.
- Morocco had been heavily dependent on imported fuel and electricity to meet its power demands. In order to solve this problem, in 2009, the country adopted a new energy strategy, according to which, Morocco aimed to increase the share of renewables significantly. As a result, during 2008-2018, the installed wind power capacity increased by over nine-fold.
- Hence, all such trends in the wind energy sector have been driving the demand for industrial gear oil in the region, thus, further boosting the growth of the African lubricants market.
South Africa to Experience Continued Growth
- South Africa’s economy has been growing at a fluctuating rate over recent years. In 2018, the country’s GDP growth rate was around 0.8%, which further fell to 0.3% in 2019. Factors, such as power cut, low business, low consumer confidence, and risk of a sovereign credit downgrade, have been affecting the economic performance in the country.
- The growth of the commercial and general aviation industry is slowing down, as a result of high operating costs and a sluggish economy. However, the launch of the African Union’s Single African Transport Air Market, which comprises 28 countries, including South Africa, in 2018, provided the airline companies with an opportunity to increase their operations on the continent.
- Major aerospace players, such as Airbus and Boeing, are expecting strong growth rates in the commercial aviation segment in the coming years in the African region, and they are looking forward to partnerships and joint ventures as viable options for expanding their footprint in the market.
- South Africa is the largest automotive manufacturer in Africa. The country exports about 60% of the vehicles produced domestically. During 2019, the country registered 10% increase in exports. However, the domestic sales declined by 2.8%. Hence, many vehicle manufacturers increased their production and export from the South African operations, on the back of incentives that were offered as part of the government’s Automotive Production and Development Plan (APDP).
- Additionally, the government planned a motor program, South African Automotive Masterplan (SAAM), to fuel the growth of the industry. The masterplan is likely to come into effect by 2021. Under the program, one of the major targets is to increase its share to 1% (i.e. around 1.4 million units) in the vehicle lubricant production by 2035, which currently stands to be around just over 600,000 vehicles per year. Thus, all such trends in the automotive industry are likely to propel the consumption of automotive lubricants in the years to come.
- The country has been increasing its wind power projects to increase the power generation capacity based on cleaner sources. With lubricants, like gear oil, being used in windmill equipment, new projects are expected to drive the demand for such lubricants.
- For instance, in June 2018, Siemens Gamesa Renewable Energy (SGRE) announced to supply two wind farms in South Africa, including 109 units of onshore wind turbines. The SWT-2.3-108 turbine is expected to feature a rated capacity of 2.3 MW and a 108 meters diameter rotor.
- Similarly, in August 2019, a South African renewable energy company received ZAR 253 million from a UK public-private joint venture for hydro and wind power projects.
- In February 2019, Enel Green Power RSA began the construction of its 140 MW Nxuba wind farm in the Amatole District, making it the group’s third wind project in South Africa’s Eastern Cape province. The construction of Nxuba, which is expected to be completed by September 2020, may involve an overall investment of more than EUR 200 million. However, the project can be delayed due to the COVID-19 lockdown.
- South Africa is currently facing a housing crisis, reporting a housing backlog of 2.3 million houses in 2018, which is growing by around 178,000 houses per year. Development in the institutional and commercial sectors was slow through 2019. Such features may dampen the construction activities in the country, thereby, affecting the demand for construction equipment and lubricants.
- The country has been working on a policy to develop its oil and gas resources. It imports approximately 60% of its oil-product needs in the form of crude, which is processed at local refineries. In February 2019, Total SA announced the first deep-water oil find off the coast of South Africa, which is anticipated to help the country decrease its imports and increase the domestic production considerably.
- Moreover, in September 2019, the government drafted a new law to secure its free stake in all new oil and gas ventures. Oil and gas companies with exploration rights have held back, due to costly drilling, for clarity related to the commercial terms. Such laws are also likely to influence the performance of the domestic oil and gas industry in the years to come.
- Hence, all such industrial trends are expected to influence the consumption of lubricants in the South African market over the forecast period.
The Africa lubricants market is fragmented with the top five players occupying around 35% of the total consumption. Some of the key players in the African lubricants market include Royal Dutch Shell PLC, Total SA, ExxonMobil Corporation, Chevron Corporation, and BP PLC, among others.
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