GLOBAL NAPHTHENIC BASE OIL MARKET Challenges and Opportunities

The global naphthenic base oil market has been facing rising production costs due to fluctuations in crude oil prices in international markets. As naphthenic base oils are manufactured from crude oil feedstocks, volatility in crude oil prices directly impacts the input costs for naphthenic base oil producers. Over the past few years, benchmark international crude oil prices have witnessed significant fluctuations depending on the demand-supply dynamics and geopolitical factors. Any increase in crude oil prices drives up the raw material procurement expenditure for naphthenic base oil manufacturers. On the other hand, prices of finished naphthenic base oils cannot be increased immediately considering the competitive nature of the market. This squeeze in margins has been a major challenge for the players in naphthenic base oil market. Rising costs have constrained the profitability of the manufacturers.

Market Opportunity - Expansion in emerging markets with rising industrial activities

The global naphthenic base oil market is witnessing new avenues of growth in the form of emerging economies experiencing rising industrialization. Many developing regions such as Asia Pacific, Latin America, and the Middle East are witnessing higher investment inflows in core sectors such as manufacturing, construction, mining, transportation etc. This is leading to increased demand for industrial lubricants and greases. Since naphthenic base oils are superior lubricants and find wide applications as industrial greases and metalworking fluids, their consumption is increasing in developing markets. The lubricant manufacturers are Expanding their naphthenic base oil requirement to cater to the thriving end-use industries in developing regions. This burgeoning demand from emerging markets with rising industrial footprints provides excellent expansion opportunities for naphthenic base oil producers looking to tap high growth regions.