Lubricant additives: Cycles

Why this business barely grows yet stays very profitable

Lubricant additives are a steady, oligopolistic business. Volumes follow vehicle kilometres and industrial activity and barely grew from 2018 to 2027 in Kline's view. Margins cycle with raw material costs: when olefins, PIB and base oil rise, additive makers lose margin for a few quarters, then recover through price increases; when inputs fall, margins widen. Specification changes (API, ILSAC, ACEA) create bursts of reformulation. The structural threat is electrification and longer drain intervals, partly offset by EV fluids.

NewMarket petroleum additives operating margin 20.5% in 2025; implied average value about $4-4.6/kg (indicative: $18-19.5 billion over 4.2-4.5 Mt).

Booms and busts

1. 2018-2022

   Demand fell from its 2018 level through Covid and had not recovered by 2022.

   a little over 4 Mt in 2022, below 2018; forecast 4.5 Mt in 2027, still below 2018 (Kline)

2. 2020

   IMO 2020 cut marine fuel sulphur to 0.5%, so ships switched from 100 BN to 40-70 BN cylinder oils, reducing detergent demand per litre.

   not public (Lubes'n'Greases, 2023)

3. 2024-2025

   Market softness and NewMarket's exit from low-margin business cut shipments and margin, along with one-off network charges.

   NewMarket petroleum additives sales $2,636 million to $2,534 million; operating profit $592 million to $520 million, margin 22.5% to 20.5% (NewMarket)

What drives the cycle

• Vehicle parc and kilometres. Engine oils are about 70% of volume.
• Raw material costs. Lagged pass-through drives margin swings.
• Specification upgrades. New API/ILSAC/ACEA and OEM specs require new packages and raise treat rates.
• Electrification and drain intervals. Reduce engine oil volume over time.

Metrics to track