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Shell Announces Increase

Shell announced a general price increase of 8% for its lubricants with an effective date of March 1, 2011. Shell says this adjustment is "due in part to increasing costs of raw materials used in the production and delivery of our products."

Price Increases - Leaders and Laggards

Due to the ramp up in the price of crude oil we have seen over the past few months, the recent round of lubricant price increases are not unexpected. This is because crude oil prices drive the price of both the base oil and additives required to blend finished lubricants. It's predictable and understandable; when the price of crude increases above a certain level and is sustained at or above that level for a period of time, the price of base oil and additives likewise has to move up. And when that happens you can be sure it's only a matter of time before the letters start to fly saying the "prices for lubricants will increase up to x% with an effective date of y." It's usually a form letter, often not even signed by the author. That's just how predicable and expected it has become.

But what's not always predictable and expected are who the leaders and laggards are when price increases roll out. Sometimes the majors lead the charge to higher prices, and other times it's the independents. This time, however, the independents lead the way. Such companies as Cross Oil, Chemlube, Amalie, Smitty's, CAM2, ALS, Peak, and Warren Oil were the first to move; each increasing its price by close to $0.40 a gallon. These were the first movers and their price increases took effect in December 2010 and January 2011.

After those initial increases were announced, many asked the same question, that being, "How long will it be before the majors move? Certainly a legitimate question since both independents and majors incur an increase in the cost of goods when crude oil prices climb and drive base oil and additive prices up. Well now we have the answer (at least in part). Chevron, CITGO, ConocoPhillips, ExxonMobil, and now Shell have each announced they too will increase the price of their finished lubricants.

So why is important for independents to know if and when the majors will increase their prices when the cost of goods goes up? The answer to this question is because it's all about timing.

Chart shown below illustrates the magnitude and effective date of recently announced price increases recorded and reported by JobbersWorld.

Whereas the majors and independents are subject to the same market forces and price drivers, independent lubricant manufacturers can operate at a competitive disadvantage if the suppliers of base oils increase their prices while their down stream businesses hold the ground on prices for finished lubricants, even if for only a month or two after the independents increase their prices.

Some speculate such lags in response are because the majors are willing to accept compressed margins for a period of time in an effort to retain and gain market share. Others say it's not so surprising to see this happen. In fact several blenders say this occurs every few years. The majors raise base oil prices and force the independents to move their finished oil prices up, while at the same time the majors do not raise their finished oil prices. In doing so, they say the majors rebuild their market share and can subsidize their actions through increased base oil margins. In the words of one large blender, "In the past, this process has given a two to three month opportunity for the majors to rebuild market share." Further this blender says, "It is a recurring story. Just look back at late 2007 and early 2008 for the last time this occurred."

Also, marketers say it doesn't go unnoticed that some of the OEMs have reduced their prices while others are pushing through price increases.

Click here to tell us what you think.

Announced increase are shown in the Table below:

RelaDyne and BioBlend Announce Distribution Agreement

'GREEN' LUBRICANTS THAT SUSTAINABLY BOOST EQUIPMENT PERFORMANCE

RelaDyne, Inc. today announced a distribution agreement with BioBlend, a manufacturer of industrial and commercial lubricants that are high-quality "green" products in demand for boosting equipment reliability in wide-ranging climates and also meeting high environmental standards of responsibility.

Three of the four founding member companies that joined forces to create RelaDyne in November 2010 have ex

perience distributing BioBlend vegetable oil-based lubricants and according to Jeff Hart, executive vice president of business development at RelaDyne, it now will be distributing these "green" lubricants on a far more broader scale to industrial and commercial equipment operators throughout the entire Midwest and Gulf Coast regions.

"This is a good fit for us, as both of our companies are focused on solutions that lead to consistent and optimal equipment performance, operational efficiency and long-term profitability," Hart said. The BioBlend products are vegetable oil-based solutions that are unaffected by extremes in temperatures, non-toxic and biodegradable."

Here in Chicago, we were one of the first distributors of BioBlend products," said Hart, whose former business, Mid-Town Petroleum, is a founding company of RelaDyne. "Green lubricants are viewed as a considerable growth area for RelaDyne because they are a great 'door opener' in new niche markets, such as universities, municipalities and enterprises that operate on the water. When these new customers discover our comprehensive array of services and products, including both vegetable-based and petroleum-based lubricants, we frequently become their exclusive provider of equipment-reliability products and services," he added.

"We're looking forward to our relationship with RelaDyne, as their strategy is progressive and they're always looking for new, innovative ways to solve their customers' equipment-reliability issues, as well as their environmental and regulatory challenges," said William H. Smith, vice president of finance and operations at BioBlend.

"With our products, industrial machinery and heavy duty commercial equipment can operate effectively in environmentally sensitive working conditions and, as such, even in the event of a lubricant spill there is no negative impact on the environment when using our products," said Sam Burkett, the CEO of BioBlend. An eight-year-old producer of hydraulic oils, rock drill oils, metal working fluids and greases, BioBlend also is meeting the needs of government entities encouraged to buy products that are safe for the environment and/or foster companies that value promoting environmental measures that they are embracing to be good corporate stewards.

While RelaDyne is just one of about 50 distributors for BioBlend, Burkett and Smith both reported that RelaDyne represents an "exciting opportunity" for their company because of its industry-changing Field Reliability Management services and strategic plans to expand its reach in the industrial and commercial lubricant markets.

GROWMARK Lubricant Manufacturing Facility to Undergo Major Renovation

The GROWMARK lubricant manufacturing facility in Council Bluffs, Iowa, is getting a facelift.

The $3.5 million renovation includes expanded bulk oil and engine coolant storage capacity, increased warehouse space and state-of-the-art equipment for Viscosity Index Improver solubilization.

"This renovation will enhance our ability to terminal additives, provide fee solubilization, and contract blend and package," said Craig Stout, director, lubricant operations. "In addition to the significant laboratory expansion and other improvements made over the last few years, this facility renovation demonstrates GROWMARK's commitment to the lubricant business and to providing superior products and services to its customers."

GROWMARK purchased the lubricant manufacturing facility in 2006 from McCollister & Co. In addition to FS-branded lubricant products, GROWMARK also manufactures and markets the Archer and United brands.

GROWMARK is a regional cooperative providing agriculture-related products and services, as well as grain marketing in 31 states and Ontario, Canada. GROWMARK owns the FS trademark, which is used by affiliated member cooperatives. The FS brand represents knowledgeable, experienced professionals acting with integrity and dedication to serve more than 100,000 customers. More information is available at www.growmark.com

CLASSIFIEDS ADS

Posted December 21, 2010

Branded Lubricant Manufacturer/Marketer has an Opening for an experienced Lubricant Manufacturing Quality Assurance Manager

Position-Quality Assurance Manager for a Large Branded Lubricant Manufacturer/Marketer at a Third Party Lubricant Manufacturing Facility located in Eastern Pennsylvania.

An International Lubricant Manufacturing/Marketing Company is looking for a self-starting, performance-driven, technically knowledgeable individual to fill the" Manager of Quality Assurance" position at a third party toll blending Lubricant facility in Eastern Pennsylvania.

Click here for more.

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