SEA Opportunities for Specialty Lubricants for Food Grade and Subsea Sector - How Viable is it?

SEA Opportunities for Specialty Lubricants for Food Grade and Subsea Sector- How viable is it?

Sushmita Mahajan Research AnalystChemicals Materials & Food

1st June 2011

2

Agenda

Market Overview

Market Drivers and Restraints

Market Trends in Specialty Lubricants

Opportunities and Challenges

What is Food Grade Lubricant

Role of Local association like MPOB

3

What is Food Grade Lubricant

• Food-grade lubricants perform the same technical functions as any other lubricant:

• It’s function is to provide protection against wear, friction, corrosion and oxidation, dissipate heat and transfer power

• It has to be compatible with rubber and other sealing materials, as well as provide a sealing effect in some cases

• The Food Grade Lubricants currently used in Southeast Asia are Ester-based lubricants without any renewable raw material content.

4

Overview of Specialty Lubricants for Food Grade

While we regularly see processed food products in the supermarkets.

Hardly ever do we think of a scenario where the fresh products come in close contact with the processing machineries.

5

Overview of Specialty Lubricants for Food Grade

•Merits of Food Grade Lubricants•Provide the food manufacturer with an effective tool to control the risks caused by contamination of lubricants (chemical hazards)•Food manufacturers can select lubrication points as Critical Control points (CCPs) in their Hazard Analysis and Critical Control Points (HACCP) plans.

Food Grade Lubricant Categories

• H1 lubricants are food-grade lubricants used in food-

processing environments where there is the possibility of

incidental food contact.

• H2 lubricants are nonfood-grade lubricants used on equipment

and machine parts in locations where there is no possibility of

contact.

• H3 lubricants are food-grade lubricants, typically edible oils,

used to prevent rust on hooks, trolleys and similar equipment.

6

Opportunities and Challenges of Specialty Lubricants

• The market for food grade lubricants and lubricants for subsea applications was estimated as US$39.2 million in 2009.

• There is a very good potential for growth as traditionally the market is dominated by mineral oil based lubricants.

• There is potential for bio-lubricants in the future because of the assured source of feedstock supply from palm oil, which is produced abundantly in Southeast Asia. However, this is a long-term prospect and will need a strong push from the government and regulatory bodies to put regulation in place to mandate the usage of bio-lubricants. 64.6%

0.7%

23.5%

11.2%

Hydraulic Fluids Gear Oil

Greases Chainsaw

$39.2 million

Specialty Lubricants For Food Grade and sub-sea application Market : Percent of Revenues by Segment (Southeast Asia), 2009

Note: All figures are rounded; the base year is 2009. Source: Frost & Sullivan

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Opportunities and Challenges of Specialty Lubricants

Challenge

1-2 Years 3-4 Years 5-7 Years

Cost Concerns

Lack of Support from OEMs

High Medium Low

Specialty Lubricants Markets for Food Grade and Subsea Applications: Impact of Top Three Industry Challenges (Southeast Asia), 2010-2016

Source: Frost & Sullivan.

8

Opportunities and Challenges of Specialty Lubricants

Countries in Southeast Asia

GDP ($ Million) (2009) GDP growth

rate in 2009

Lubricant (mineral oil-based and synthetic) market growth rate (2009)

Specialty Lubricants market growth rate (2009)

Singapore 163.1 -2.0% 5-7% 3-4%

Malaysia 207.3 -1.7% 4-5% 2-3%

Indonesia 514.9 4.5% 10% 5-6%

Thailand 266.4 -2.3% 8-10% 2%

The Philippines 158.7 0.9% 5-7% 3%

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Market Drivers and Restraints

Drivers

Restrain

ts

Drivers

Restrain

ts

Denotes long-term Impact Denotes short-term impact

Food manufacturing industry growth

complemented by proactive effort of

lubricant manufacturers

Safety concerns by the leading food manufacturing companies drives the need

Source: Frost & Sullivan.

Specialty Lubricants (Food Grade and Subsea oil & Gas Sector) Market: Drivers and Restraints (Southeast Asia ), 2010-2016

Higher price restrains the market growth

Absence of proper regulation prevents bio-lubricants to be

accepted widely

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31.0

32.0

33.0

34.0

35.0

36.0

37.0

38.0

39.0

40.0

2006 2007 2008 2009

Rev

enu

es (

$ M

illi

on

)

Revenues ($ Million)

Market Trend

Specialty Lubricant Market Trend in Southeast Asia

Source: Frost & Sullivan

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Current Research Initiatives in Southeast Asia Done by Malaysian Palm Oil Board

Advanced Oleochemical Technology Division of Malaysian Palm Oil Board (MPOB), Malaysia, has developed six types of palm esters using palm-based material. The resulting palm esters could be used on its own as a base fluid to formulate a bio-lubricant or blended with other esters, mineral oil, or synthetic oil to produce the desired lubricants.

Role of Associations Like MPOB

Food-grade

Lubricant ISO VG

15

Food grade

Lubricant ISO

VG 22

Food grade

Lubricant ISO

VG 22

Food grade

Lubricant ISO

VG 46

Food Grade

lubricant ISO

VG 68

Food grade

lubricant ISO

VG 100

Food-Grade Lubricant Patented by Malaysian Palm Oil Board

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For Additional Information

Donna JeremiahCorporate CommunicationsAsia Pacific+603 6204 [email protected]

Carrie LowCorporate CommunicationsAsia Pacific+603 6204 [email protected]

Sushmita MahajanResearch AnalystChemicals, Materials & Food+65 6890 [email protected]

Jessie LohCorporate CommunicationsAsia Pacific+65 6890 [email protected]