Lubricant Prices Move Down - Trend or Correction?
Many lubricant manufactures in the US market announced up to 15 increases in the price of lubricants from 2019 to 2022. The increases ranged from a low of 8% to a high of 30%. To get a sense for the impact the extraordinary number of price increases had over the period, JobbersWorld took a look at actual prices paid by one medium to large size commercial account for like brands and product types and grades from the start of 2019 to the end of 2022. Although the prices examined do not reflect average prices over the time sequence, and others may have paid more or less for such products, the data is illustrative of the very significant increase in lubricant prices over the period.
The pricing data examined shows that the price the account paid for HDEO moved up by close to 46% in a matter of four years. Although in and of itself remarkable, even more remarkable is the jump in prices seen as the market recovered from Covid. For this particular account the price paid for HDEO escalated by nearly 25% from 2020 to 2021. This represented an increase roughly $2.80 a gallon, and another $1.80 a gallon was layered onto that in 2022.
Importantly, the very sizable jump in prices seen in 2021 and 2022 came during the time period when the industry moved through 13 increases in the price of base oils, and lubricant additive prices move up 5 times. In addition, the industry was struggling with serious supply chain issues, additive shortages, allocations, and skyrocketing increases in the cost of transportation, labor, packaging, and other inputs used in the manufacturing and distribution of lubricants. So, the reason for the rapid fire of price increases seen over the period was understandable.
But unlike the last two years, this year started off with a sizable drop in the price of base oils. Shortly after, two majors announced decreases in the price of finished lubricants by up to 8%. And although others have not formally announced decreases, some buyers say they are now seeing the lubricant prices of others drop by 5 to 8%. Interestingly, however, a drop in prices is not seen across all product types and grades. Further, while the price of some lubricant types are moving down, the price of others are holding and/or inching up, and grease prices continue to escalate. With these changes, the question many are now asking is if the recent price movements represent a short-term market correction, or a trend we can expect to see play out in 2023.