GCC Lubricant Packaging Demand to Decline Due to Covid-19 Pandemic and Resultant Decrease in Sales of Automobiles

 

The GCC lubricant packaging market involves players such as Saudi Can Manufacturing Company Ltd., Mold Tek Packaging Ltd., First Press Plastic Moulders Ltd., Neelkamal Plastics Factory LLC., and Duplas Al Sharq. In lubricant packaging, metals including tin and steel are used. There are various types of lubricant packaging that include, pouches, bottles & cans, drums, pails, tubes, bag-in-box, kegs, and intermediate bulk containers.

The demand for lubricant packaging in countries such as the U.K and the U.S. is expected to witness a significant decline. This can be attributed to declining in sales of automobiles due to the Covid-19 pandemic. For instance, according to the Society of Motor Manufacturers and Traders, the new car registrations in the U.K. decreased by 44% in March 2020 compared that in March 2019. Moreover, North America is also expected to witness a significant decline in the V2X communication market, as sales of motorcycles and cars, witness a downward trend. For instance, Yamaha Motor Co. has projected that the company’s motorcycle sales will drop 4.7% to 60,000 units in North America in 2020. During the fiscal year ended December 31, 2019, motorcycle sales dropped 6.3% to 63,000 units year over year. Similarly, Harley-Davidson Inc. reported that retail sales volumes dropped 4.3% in 2019 from 2018.  

There has been a significant amount of consolidation in the last few years among the largest players in the market for GCC lubricant packaging. Moreover, some of these players have merged with smaller companies in an attempt to reduce their operating costs. This has resulted in increased competition in some areas and price wars in others. The large companies will provide the bulk of the demand, however small and medium sized vendors will play an important role in counterbalancing the dominant players.

Currently most of the lubricants imported into Asia Pacific are used for applications other than those in the auto industry. Therefore, there is a relatively low risk for the company to incur any significant lubricants pricing risk. However, due to the increasing role of lubricants in both industrial and domestic applications, the need for domestically sourced raw materials will become more important. This in turn will have a direct bearing on the price trend analysis. For this reason it is not uncommon for lubricants importers to enter a price war with suppliers of other types of lubricants.