MAGNUM Blog

Hydraulic oils and transmission fluids transmit power in hydraulic equipment and are used in power transmission applications. They are incompressible fluids that are used as the power transmitting media in hydraulic systems. Hydraulic power systems involve a series of tubes or elastomeric hoses for transmitting pressurized fluid, a pump (as a power source), and some type of control (typically a series of valves, actuators, or cylinders) as the power transmission media, hydraulic fluids are indispensable in these systems. Transmission oils are essential to clean and protect the surface, condition gaskets, rise temperature range, increase rotational speed, and improve cooling function, and reduce high temperatures. They are used to lubricate, transfer energy, ensure smooth transmission in motor vehicles, agriculture equipment, construction, and mining equipment. Hydraulic fluids are used as a medium for transferring power and energy in hydraulic systems. Additionally, they are used for heat transfer, sealing, contaminant removal, and lubrication. The majority of the hydraulic fluids are based on mineral oils. The applications of these fluids include excavators, hydraulic brakes, lifts, flight control systems, power steering systems, excavator booms, dippers, hydraulic brakes, power steering systems, mechanical transmission systems, lifts, and general industrial machinery.

The Indian lubricants market

  Product Type :

֍ Engine Oil

֍  Transmission and Hydraulic Fluid

֍ Metalworking Fluid

֍ General Industrial Oil

֍ Gear OilGrease

֍ Process Oil

  Application:

֍ Power Generation Automotive and Other Transportation

֍ Heavy Equipment

֍ Food and Beverage

֍ Metallurgy and Metalworking

֍ Chemical Manufacturing

Automotive and Other Transportation:

India is the second largest lubricant consumer in the region and third in the world, after the United States and China. The country is the fourth and sixth largest producer of commercial vehicles and passenger cars, respectively. The country’s automotive industry accounts for around 7.1% of the country’s GDP, in which the two-wheeler segment accounts for a share of around 81% share, owing to the growing young and middle-class population. Additionally, the government’s initiatives, such as the Make in India campaign, are helping the local and state-owned manufacturers to provide their products to consumers and offer stiff competition to the international players. However, India’s automotive industry has been declining from the past one year due to a continuous slump in demand, slowing economic activity, and an increase in vehicle ownership costs. The outbreak of COVID-19 has further affected the economy at present, as all the manufacturing sectors has been stopped due to lockdown. Thus, the aforementioned factors are expected to impact the automotive industry, which in turn will affect the growth of the lubricants demand in the country.

Road Ahead

We expect growth to remain stable for now but would increase going further. The Growth rate of 4-5% YoY can be forecasted for this sector.

BENEFICIARIES: CASTROL, BPCL, HPCL, IOC, GULF OIL.

India becomes the second-largest steel producer in the world, overtaking Japan, with a growth rate of 4.9%. India is also expected to become the world number two in steel consumption. The sector would be driven by strong government thrust for infrastructure development and housing for all. Government initiatives such as ‘Smart Cities’ and ‘Affordable Housing’ as well as building of industrial corridors will boost India’s steel demand. Rail Infra, Supply Chain Management, Heavy Engineering & Defence, Gas Pipelines etc would also add to demand of this sector.

Transforming India into a global manufacturing hub for pharma, with sectors along the industrial and freight corridors. To set up automotive and ancillary industries to make India global hubs for manufacturing & exporting cars & Two wheelers.

Further improving Steel demand as China becomes net importer of Steel. Moody’s changing “steel outlook” for all regions which include the US, Europe, Russia, Brazil and Asia to stable. Increase in price of around 3000-4000 per tonne added advantage. vSteel-making capacity is expected to reach 300 million tonnes per annum by 2030–31. vCrude steel production is expected to reach 255 million tonnes by 2030–31, at 85% capacity utilisation. vProduction of finished steel to reach 230 million tonnes, assuming a yield loss of 10% for conversion of crude steel to finished steel – that is, a conversion ratio of 90%. vWith 24 million tonnes of net exports, consumption is expected to reach 206 million tonnes by 2030–31. (source PWC report)

Port connectivity through the Sagarmala programme envisages port-led industrial development covering all major maritime zones in India. Oil and gas sector, the Urja Ganga Gas Pipeline Project aims to develop a 15,000-km gas pipeline network. Advance Warehousing & Logistic Hubs. National Investment and Manufacturing Zones (NIMZs) are being developed across the country, with 14 NIMZs already receiving in-principle approval. In addition, eight investment regions along the Delhi–Mumbai Industrial Corridor Project (DMIC)have also been announced as NIMZs.

Road Ahead

Overall demand visibility remains steady going forward. Industry Growth of around 4-6% can be assumed.

Government’s focus on infrastructure and restarting road projects is aiding the demand for steel. Also, further likely acceleration in rural economy and infrastructure is expected to lead to growth in demand for steel.

BENEFICIARIES: TATA STEEL, JSW STEEL, JINDAL STEEL, KALYANI STEEL, SAIL

The civil aviation industry in India has emerged as one of the fastest growing industries in the country. Growth due to COVID came to stand-still and Industry faced debt issue. India has become the third largest domestic aviation market in the world and is expected to overtake UK to become the third largest air passenger market by 2024.

India’s passenger traffic is slowly picking up and currently passenger load factor is increasing. Low cost carrier SpiceJet announced the launch of its seaplane service between Ahmedabad (Sabarmati riverfront) and the Statue of Unity in Kevadia, Gujarat. The flights will be operated by SpiceJet’s fully-owned subsidiary, Spice Shuttle using a 15-seater Twin Otter 300 aircraft, the airline adding that it has secured 18 seaplane routes under UDAN. In an attempt to connect small cities of India with each other, the Government of India launched a Regional Connectivity Scheme, Udan (Ude Desh Ka Aam Nagrik). The scheme reached its fourth stage as the aviation ministry gave nod to 78 fresh routes under UDAN 4.0 to enhance connectivity to remote and regional areas of the country. In this stage, north east states, hilly areas and islands of India have been given priority. The fresh routes will encourage tourism & local travel in these areas and help strengthen their economies.

Freight is one more vertical of this industry, the freight traffic seems to be slow but gathering pace. The government has allowed 100% FDI under the automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline. However, FDI over 49% would require government approval. Government introduced Krishi Udan scheme on both domestic and international routes to help farmers in transporting agricultural products and improve the product value.

Road Ahead

Lot of Scope available in this sector as huge opportunity untapped, considering that air transport is still expensive for majority of the country’s population.

India would be well placed to achieve its vision of becoming the third-largest aviation market, would push growth automatically. The growth rate of more than 10% could be seen over next 2-3 years.

BENEFICIARIES : INDIGO, SPICEJET.

Oil and gas sector among the eight core industries in India and plays a major role in influencing decision making for all the other important sections of the economy. The need for oil and gas is projected to grow more as expansion in gas-based plant are finding more traction and cheap productivity, thereby making the sector quite conducive for investment.

India’s oil refining capacity stood at 249.9 million metric tonnes (MMT), making it the second-largest refiner in Asia. Private companies own about 35.29% of the total refining capacity in FY20. India’s consumption of petroleum products is almost come back to Pre-Covid levels. Export of petroleum products from India has shown tick down due to current environment.

State run energy firms, Bharat Petroleum, Hindustan Petroleum and Indian Oil Corporation, plan to spend US$ 20 billion on refinery expansions to add units by 2022. Disinvestment in BPCL is ongoing. With 8,748 kms of refined products pipeline in India, IOC was leading the segment with 51.25% of the total length of product pipeline network as on March 01, 2020The Government is planning to set up around 5,000 compressed biogas (CBG) plants by 2023. The Government is planning to invest US$ 2.86 billion in the upstream oil and gas production to double natural gas production to 60 bcm and drill more than 120 exploration wells by 2022. Government of India is planning to invest Rs 70,000 crore (US$ 9.97 billion) to expand the gas pipeline network across the country.

The energy trade between India and US is likely to cross US$ 12 billion in FY22. As on April 01, 2020, there were 24,670 LPG distributors (of PSUs) in India. The total number of OMC retail outlets at 66,817 at the beginning of April 2020.Private players like Reliance Essar are also expanding their foot print day by day to compete with OMCs.

Road Ahead

Energy demand of India is anticipated to grow faster than energy demand of all major economies on the back of continuous robust economic growth.

India’s energy demand is expected to double by 2035. Primary energy consumption is projected to increase by two-fold by 2035Growth of 7-8% can be projected going forward.

BENEFICIARIES : IOC, BPCL, HPCL, ONGC, RELIANCE, GAIL