The gap between the re-refining industries in developed and developing countries continues to grow, according to Kline’s new analysis, Global Used Oil and Re-Refined Lubricants: Market Analysis and Opportunities. In its latest study, market research and consulting firm Kline explores the challenges and drivers of this fast-evolving market that has seen used oil transition from being a real disposal liability to a product that has significant economic value.
The re-refining industry is evolving in two different directions. In the developed countries of Western Europe and the United States, as well as in Brazil, the industry already has significant Group II re-refined basestock capacity, and more is being added or upgraded to produce higher-quality basestocks.
On the other hand, in the developing markets of Russia, India, and Mexico, re-refiners struggle to procure enough used oil due to other avenues that are available for its disposal—for example, illegal dumping or its use as fuel. China stands somewhere in between.
The four factors that govern the usage of used oil as fuel are re-refining capacity, demand for re-refined basestocks, quality of used oil, and enforcement of regulations. Developed countries are grappling with issues of low re-refining capacity or low demand for re-refined basestocks due to an abundant supply of virgin basestocks. The developing countries, however, are working to solve challenges such as the quality of used oil and poor enforcement of regulations. This is leading to no, or very slow, development of the re-refining industry in developing countries.
The eight markets studied—United States, Canada, Mexico, China, Western Europe, Brazil, Russia, and India—account for 65% of global lubricant demand and together generate nearly 15 million tonnes of used oil. However, the disposal routes of this used oil differ sharply between the developed and developing countries.
Strongly enforced regulations combined with an established collection system in Western Europe, Brazil, China, the United States, and Canada mean they have the highest collection and disposal of used oil. In most of the developed countries, more than 50% of used oil is supplied for re-refining. Developing countries also have good collection rates, since people understand that the used oil has an economic value. But, the share of re-refining is less than 20% due to lax enforcement of regulations, which means most of the used oil collected is disposed of as fuel.
“Looking ahead to 2028, re-refining rates are expected to grow,” confirms Kunal Mahajan of Kline’s Energy Practice. “This will be driven by a number of factors, including increased re-refining capacity, growth in demand for re-refined products, the increased availability of higher-quality used oil and stronger enforcement of regulations. The ability to produce re-refined Group II and III basestocks to meet the growing demand for higher-quality finished lubricants in the automotive sector will enable re-refiners to compete more effectively with virgin basestock producers.”
However, the basestock market is constantly changing. From a time when basestock prices were high—creating an incentive to maximize used oil collection—it has come full circle to a time of low crude oil price, resulting in low prices of virgin basestocks. In this challenging market, it is essential for used oil collectors, re-refiners, lubricant blenders, and marketers to be agile so that they can shift operations in order to capitalize on the opportunities that do arise.
To gain the latest insights about used oil and the re-refined lubricants market, request the recording of Kline’s recently held WEBINAR.
The Kline report Global Used Oil and Re-Refined Lubricants: Market Analysis and Opportunities provides a detailed independent appraisal of this complex market, with forecasts out to 2028. It explores the challenges used oil collectors, re-refiners, lubricant blenders, and marketers need to overcome and analyzes market trends, growth drivers, restraints, and regulations to help identify the areas of potential high growth.