The global re-refined base oil market was valued at USD 3.40 billion in 2022 and is expected to reach USD 5.05 billion by 2028, growing at a CAGR of 6.82% during the forecast period. Over the years, climate change, increasing environment consciousness, and the pursuit of higher performance by original equipment manufacturers have resulted in the greater use of re-refined base stock. Re-refined base oil delivers high-quality base oil, and its processing is also environment friendly than refining base stock from crude oil. Unlike the base stock group, the re-refined process manufactures only Group I, Group II, and some Group III base stock. Furthermore, the re-refined base oil market is evolving to cater to customers' changing needs and preferences.
The re-refined base oil market is expected to reach 5,685.71 kilotons by 2028. Furthermore, the re-refined base stock product has become a widely used product throughout the globe. One major sector that consumes these products on a greater scale is the automotive sector, mainly owing to the increasing production of vehicles globally. Moreover, global economic growth has played a vital role in the demand and consumption of this market. However, the re-refined base oil market poses moderately consolidated behavior regarding vendors. The competition among these companies has increased, leading to the introduction of various innovative and cutting-edge solutions in the market.
In addition, North America has a surging demand for sustainability, accounting for net zero emissions, which will reduce the negative environmental impact caused by conventional lubricants. Therefore, bio-based lubricants are expected to increase the demand for premium base oil in the forecast period because of their biodegradability, viscosity, and energy efficiency properties. Moreover, the U.S. is one of the major markets for re-refined base oil production owing to the presence of crude oil reserves and developed infrastructure for transportation, which attracted global players to set up their plants in the country. From a demand perspective, construction, mining, and automotive sectors consumers the country's major chunk of re-refined base oil.
MARKET TRENDS & DRIVERS
Growth in Demand for High-Quality Base Oil
With the growing trends towards better fuel economy, increasing engine oil durability, and reducing pollution levels, the demand for high-quality base oil, i.e., Group II and Group III, is gaining momentum in the re-refined base oil market. Group I base oil has been used for decades in producing lubricants, especially industrial & marine lubricants, and oil for older engines. Still, the demand for Group I is declining in the global market, primarily because Group I base stocks have low thermal and oxidative stability, making it undesirable for them to operate during severe conditions in modern-day engines. Additionally, it contains a high amount of sulfur and aromatics hydroprocessed oil. When high sulfur content is released into the environment, it poses a major threat to the environment and health. In addition, increasing automotive regulation to reduce CO2 emission in the environment has led automotive manufacturers to switch towards high-quality lubricants based on Group II and Group III base oil. Therefore, with such ill effects on ecology and automotive regulation, the U.S., Canada, China, India, and some Western European countries are switching from base I group oil to base II & base III group oil.
Country Regulation is Shaping the Industry
With the increasing sustainability trend across the energy and transportation sector, reducing carbon footprint, and rising demand for premium base oil, the re-refining base oil process is gaining momentum. The growing trend regarding environmental sustainability has changed the perception of used oil management and supported the re-refined base oil market growth. Hence, consumers have become reluctant to dispose of used waste oil in sewage or waterways or burn it off. However, the burning of used oil is being continued, especially in undeveloped or developing nations, owing to the lack of awareness and proper waste collection units. Therefore, several local and national governments have implemented various management and regulatory programs to encourage the collection and refinement of used oil through incentives, legislation, and penalties based on the problem and how best to collect and manage used oil. For instance, Turkey's government imposes legislation while Italy offers significant subsidies to encourage the collecting and re-refining of used oil.
Collecting the Used Base Oil
One of the major challenges hampering the re-refined base oil market's growth is the collection of used base oil. Collectors are those entities or agencies that collect used base oil from various small service stations, manufacturing establishments, and heavy industry units and transport it to a re-refining/disposal facility. Collection centers typically collect used base oil from multiple sources, including large-scale institutions, repair shops, industrial operations, and commercial buildings. Further, the main categories of used base oil generators include car repair shops, service stations, motor pools, department stores, marine vessels, and metalworking industries. The collection of used base oil is daunting due to the widely scattered generator points. In addition, the lack of proper infrastructure for waste oil collection also creates an issue.
INSIGHTS BY GROUP
The global re-refined base oil market by Group is divided into three segments: Group I, Group II, and Group III. Regarding revenue, Group II re-refined base oil led the market, followed by Group I & Group III re-refined base oil. Due to the low sulfur content, low volatility, and lower viscosities, the automotive and industrial lubricant manufacturers highly prefer Group II base oil over Group I. In addition, the growth of aviation, commercial road transport, mining activities, and food processing machinery is expected to contribute to the increasing demand for Group II re-refined base oil products. During the forecast period, Group II re-refined base oil is expected to dominate the re-refined base oil market and will witness higher growth.
INSIGHTS BY TECHNOLOGY
The different technologies used in re-refining the waste oil include clay treatment, vacuum distillation, solvent extraction, hydrotreating process, and others. Regarding revenue, the clay treatment led the global re-refined base oil market and is primarily used to produce Group I base oil. It is often used as a finishing step for lubricant extraction from vacuum distillation. Clay treatment is generally suited for smaller plant capacities due to low capital investment. Solvent extraction is expected to dominate the global re-refined base oil market during the forecast period, and it is expected to grow at a CAGR of over 7%. Solvent extraction is still the most widely used technology for re-refined base stock formulations.
INSIGHTS BY END USERS
Re-refined base oils are primarily used across automotive, industrial, process, grease, metalworking fluid, and hydraulic oil. Automotive oil held the most dominant global re-refined base oil market share in 2022 and is expected to dominate the market during the forecast period. Automotive engine oil is designed for light, medium, and heavy commercial vehicles, pump sets, agricultural tractors, marine engines, outboard motors, commercial & passenger cars, and two and three-wheelers. Automotive oil has a vast impact on the operability and efficiency of the oil. The main function of automotive oil is to protect the metal surface from corrosion, reduce friction on moving parts, and clean the engine from sludge. In addition, these oils also extend the life of automotive gears.
Industrial oil is the second-largest sub-segment and will continue to grow because every industry uses it for smooth functioning. Increasing industrial activity such as food processing, textile, aerospace, and oil fields across the globe will provide growth opportunities in the industrial oil segment. Rapid industrialization in emerging economies and increasing technological advances in production units drive the demand for industrial oil. Major industries flourishing across the countries include energy, mining, and chemicals, further expected to boost the demand for industrial oil in industrial engines, hydraulic, compressors, and centrifuges & engines.
North America held the largest global re-refined base oil market share in 2022, accounting for over 34% in revenue. The region was led by the U.S. and Canada, where the penetration of re-refined base oil products is high, and the market revenue has been increasing steadily. North America is a major hub for the production of re-refined base oil owing to the developed infrastructure, supportive government measures, and the presence of top-notch players such as Universal Lubricants, Valvoline, Safety Kleen, and others. Moreover, the growing hospitality and manufacturing industry in the U.S. is expected to drive the new construction of commercial buildings. In addition, the U.S. has some of the largest commercial spaces in the world, including shopping malls, business centers, hotels, and other large retail stores. Thus, such new construction in the region is likely to drive the U.S. re-refined base oil market specifically for application in construction and furniture largely.
The European re-refined base oil market is projected to witness the fastest growth rate in the global market during the forecast period. The European market has significantly grown due to increasing production and sales of various vehicles, such as cars and heavy-truck vehicles. As a result, this boosts the demand and deployment of re-refined base oil products, such as greases, engine oil, and others, to ensure the efficiency and high performance of the vehicles. Besides, the growth across the region's manufacturing and industry sectors demands a re-refined base oils market’s growth.
The competitive scenario in the global re-refined base oil market is currently intensifying. The rapidly changing technological environment can adversely affect vendors as customers expect continual innovations and upgrades. The industry is consolidated, with few players providing re-refined base oil products with high functionality. The major vendors in the global re-refined base oil market are Safety-Kleen Systems, Heritage-Crystal Clean, Vertex Energy, and STR Tecoil. These companies serve the global market with Group I and Group II re-refined base stocks. However, there are local vendors providing products with similar specifications. The major vendors continually compete for the leading position in the market, with occasional competition coming from other local vendors.