Polyalphaolefin (PAO) Market

Market Overview

The global polyalphaolefin (PAO) market size was valued at USD 1.73 billion in 2022. It is estimated to reach USD 2.45 billion by 2031, growing at a CAGR of 3.96% during the forecast period (2023–2031). The projected increase in demand for bio-based formulations (Bio-PAO) is expected to be influenced by the growing need for energy efficiency and reducing carbon emissions.

Polyalphaolefins (PAOs) are 100% synthetic base oils created by synthesizing. These oils are produced from a mixture of alpha-olefins rather than being extracted. Consequently, unlike other classifications of base oils, it is devoid of sulfur, wax, nitrogen, and ringed structures. Polyalphaolefins have a viscosity index ranging from 125 to 200, and formulators can construct PAOs with a viscosity index of up to 140 by combining various alpha olefins.

PAOs have greater oxidative stability at extreme temperatures and low pour points, making them suitable for use in both warm climates (the Middle East) and frigid climates (Europe). It is one of the most important and extensively used synthetic base oils in producing engine, gear, bearing, compressor, and high-temperature grease. It serves heavy manufacturing, automotive, aerospace, and oil and gas industries. The American Petroleum Institute has classified polyalphaolefin (PAOs) as group IV base oils.

Market Dynamics

Global Polyalphaolefin (PAO) Market Drivers

Growing Demand for Bio-Based Polyalphaolefins

The demand for bio-based formulations is predicted to rise throughout the forecast period, driven by the rising demand for energy efficiency and low-carbon emissions. Bio-based PAO lubricants are intended to be a replacement for petroleum-based lubricants, and they can help alleviate a variety of environmental issues. Bio-based PAO lubricants have the benefit of being adjusted or reused several times before they have an environmental impact. As a result of their low environmental impact, bio-based lubricants are increasingly favored, resulting in a prominent expansion in the market for bio-based lubricants over the forecast period.

The need for bio-lubricants is growing in the construction and heavy machinery industries. Since the construction industry requires the continuous and proper operation of heavy equipment, they are prone to wear and tear, necessitating sufficient lubrication. Bio-lubricants will be less harmful to the environment, and machines will produce less smoke, putting health and safety first. As a result, the conversion to bio-based, biodegradable lubricants will likely boost the lubricant market in the heavy machinery and construction industries throughout the forecast period.

Rising Demand for Electric Vehicles

Lubrication is essential in automobiles since it is utilized extensively in the engine and automotive components. Lubricants are used in electric vehicles to avoid copper corrosion in electrical components in hybrid electric vehicles. In electric vehicles, PAO-based synthetic lubricants are utilized to manage thermal characteristics. New issues in the automobile sector are being addressed by synthetic lubricants with reduced viscosity and new operating conditions in EVs.

In addition, manufacturers are transitioning to ultra-low viscosity lubricants with desirable physical qualities, making synthetic lubricants increasingly important. PAO-based synthetic lubricants have been shown to have improved oxidative stability, allowing for longer product life, drain intervals, and desirable electrical conditions attributes during the lifespan of the lubricant.

Global Polyalphaolefin (PAO) Market Restraints

Volatility in Raw Material Prices

Polyalphaolefin suppliers have been facing certain restraints over the last few years. At one end, environmental regulations drive the PAO market to develop new "greener" products, whereas surging raw material and energy costs threaten to block the progress. Raw materials such as ethylene, propane, butane, naphtha, and gas oil make different polyalphaolefins with low viscosity, high viscosity, and medium viscosity. Almost all these raw materials are derived from crude oil.

The price of crude oil is generally high and uncertain as it fluctuates frequently, directly impacting the cost of raw materials and affecting the cost of polyalphaolefin (PAO) products. Therefore, the high price of raw materials is a constant nuisance for PAO manufacturers. The rising prices of crude oil and political uncertainty in regions such as the Middle East, Europe, and Africa have heavily impacted the PAO industry because raw materials used in PAO production are derived from crude oil.

Global Polyalphaolefin (PAO) Market Opportunities

Increasing Demand from Automotive Sector 

The growing demand for PAO from automotive OEMs for improving engine efficiency and minimizing vehicle VOC emissions propels the worldwide market. One of the largest users of polyalphaolefin is the automotive industry. Base oil makes up 70−90% of engine or vehicle oil, while additives make up 10−30%. Engine oil is one of the most important components in the combustion cycle of a vehicle.

Some major reasons driving the growth of the automotive engine oil market are rising buying power, government laws for engine oil, and growing demand from the automotive sector because of the rising vehicle demand. As a result of this expansion, there is a major demand for high-quality PAO vehicle engine oil to satisfy the continued trend of lower CO2 emissions and improved fuel efficiency. Such factors create opportunities for market expansion.

Regional Analysis

Europe Dominates the Global Market

Based on region, the global polyalphaolefin (PAO) market is bifurcated into North America, Europe, Asia-Pacific, and the Rest of the World. 

Europe is the most significant global polyalphaolefin (PAO) market shareholder and is estimated to exhibit a CAGR of 3.81% during the forecast period. The UK, France, Italy, and Spain are the world's most developed economies. The EU accounts for around 76% of Europe's total GDP. Automobiles are the market's most successful sector. Since the beginning of the Industrial Revolution, Europe has evolved significantly regarding living standards, per capita income, productivity norms, and adoption of innovation and technology. The region's expanding economic strength has hastened urbanization, with inhabitants opting for more individualized and smart homes to improve their quality of life.

Furthermore, as the industrial sector grows, so does the demand for polyalphaolefins. Germany is one of the region's most significant markets for polyalphaolefins due to the variety and broad use of lubricants in the vehicle industry. As manufacturers attempt to build lighter, more fuel-efficient vehicles, polyalphaolefins are increasingly being used in the components of electric vehicles. In addition, Germany's government has announced plans to triple the number of purchase incentives for EV batteries as part of its USD 156-billion effort to battle the COVID-19-devastated economy. The Tesla Gigafactory in Berlin will help Germany's electric vehicle sector grow and benefit the country's polyalphaolefins industry in the coming years.

North America is estimated to exhibit a CAGR of 4.04% over the forecast period. The region is expected to grow healthy during the forecast period due to advancements in end-user applications like automotive and industrial. Automobiles, construction, aircraft, and electronics are some of North America's significant industries that use PAOs. North America also accounted for more than 53% of worldwide aircraft component manufacturing in 2021, according to the Aerospace Industries Association (AIA). Due to the increased air traffic in the region, this scenario is projected to hold during the forecast period. In addition, higher aerospace production will fuel the need for polyalphaolefins used in industrial equipment. As a result of increased new well efficiency and decreased production costs, the US oil and gas industry has turned into a magnet for investment. North America is also projected to witness more active exploration and production in the oil sector. This has piqued the interest of overseas investors trying to profit from the scenario.

Asia-Pacific region was the third-largest market for polyalphaolefins. Due to the dominance of the automotive and industrial sectors, it is also predicted to be the fastest-growing market during the forecast period. Asia-Pacific is on track to become the world's most powerful and influential economy. It comprises high-growth countries, including Japan, China, India, South Korea, and Australia. Due to the enormous infrastructure projects that smaller nations like Vietnam undertake, the area also provides a conducive environment for their growth. The Asia-Pacific area is establishing itself as a center for developing new industrial markets, thereby driving regional market growth.

Brazil, Saudi Arabia, and Mexico are major countries in the Rest of the World section. Brazil is the most significant economy in Latin America and a key contributor to the region's growth. Brazil is a key market for PAO due to the fast-growing economy and promising end-user industries such as automotive and manufacturing. In the automotive sector, Brazil produced around 2,248,253 cars and commercial vehicles, which was a rise of 12% from 2020, as per OICA. In addition, Brazil is an important country in Latin America. The significant raw material availability and access to a strong labor force are the major growth drivers in Brazil.

Furthermore, the Saudi Arabian market is dominated by crude oil, petroleum refining, and construction industries. Saudi Arabia is a significant market for PAOs since the Saudi Arabian government plans to diversify its economy with a focus on non-oil industries; the requirement for lubricants is expected to develop faster during the forecast period.

Segmental Analysis

The global polyalphaolefin (PAO) market is segmented by type and end-user.

Based on type, the global polyalphaolefin (PAO) market is bifurcated into low viscosity, medium viscosity, and high viscosity. 

The high-viscosity segment dominates the global market and is projected to exhibit a CAGR of 3.71% over the forecast period. High-viscosity PAO base stocks are particularly well-suited for industrial oils needing high stability under intense working conditions and are available in viscosities of 40 and 100 cSt at 100°C. They are commonly used as a viscosity booster with lower-viscosity fluids (PAOs, mineral oils) to create a wide range of ISO VG industrial and automotive gear oils. In addition, high-viscosity polyalphaolefins are synthetic base oils with high viscosity improvers, high performance, and extreme service group IV base oils. Formulators now have new choices for bringing novel synthetic lubricants to the market, thanks to their great shear stability, exceptionally low volatility, high viscosity index, and broad temperature service range.

Furthermore, high-viscosity PAOs make up a minor percentage of the entire PAO market and are used to increase the viscosity of final lubricants in the ISO 22 to ISO 460 range. Previously, high-viscosity PAOs were only available in 40 cSt and 100 cSt viscosity ratings. However, manufacturing 1,000 cSt and higher is now possible thanks to modern metallocene catalyst technology. Industrial lubricants are the primary market for high-viscosity PAOs.

Lubricants with a medium viscosity are utilized in medium-speed, medium-load, and low-temperature applications. Usually, high-viscosity oils or lubricants with an extreme pressure anti-wear agent are used while working with a heavy load, low speed, and high temperature. Low-viscosity lubricants are employed under low load, high speed, and low-temperature circumstances. The most frequent form of crude oil is medium crude oil. They have a viscosity between 22.3° and 31.1° API, making them more viscous than light crude. However, they are less volatile than light crude oils and less prone to evaporation.

Additionally, medium crude oils are usually a mix of light and heavy oils. The more desired light hydrocarbons can be separated via distillation. After refining, the heavier oil components, known as "residuum," might be further processed to create more valuable end-products, or they can be sold as-is for a smaller profit than the light hydrocarbon components.

Based on end-users, the global polyalphaolefin (PAO) market is segmented into automotive, industrial, and others. 

The industrial segment owns the highest market share and is estimated to exhibit a CAGR of 3.81% during the forecast period. PAO-based synthetic lubricants are synthetic gearbox and circulation lubricants made from premium polyalphaolefin base fluids for enclosed systems that require anti-wear and antioxidants without ash. These oils are designed to lubricate well in hydrodynamic and moderate boundary lubrication situations. They are ideal for gear systems subjected to moderate loads and high temperatures, such as worm gears made of soft metals. PAO-based lubricants are versatile lubricants with a wide range of industrial uses. The demand for industrial oil is driven by rapid industrialization in emerging nations and increased technological advancements in manufacturing units.

Furthermore, energy, mining, and chemicals are three major industries that are booming around the globe, which is predicted to increase demand for industrial oil in industrial engines, hydraulics, compressors, and centrifuges and engines. The growing manufacturing of airplanes and cars and the rising production of ready-to-eat or packaged foods and medical gadgets drive the demand for industrial PAO oil.

The primary purpose of automotive PAO-based lubricants is to minimize friction and wear and tear in car engines and clean them of sludge and detergents. It also neutralizes acids produced by gasoline, improves piston ring sealing, and cools the engine by transferring heat away from moving parts. Engine oils are available in various viscosities, including high, medium, and low. Polyalphaolefins are now the most popular materials for making synthetic lubricants, fueled by the rising need for low-viscosity and low-volatility lubricants and the demand for greater fuel efficiency.

Additionally, aromatic content is normally about 1% or lesser, with sulfur nearly non-existent. Thus, these polyalphaolefins have improved thermal stability, oxidation stability, and cold flow qualities compared to mineral oil-based lubricants. Performance engine oils formulated with high-performance, fully synthetic polyalphaolefin base stocks provide a cutting-edge additive system, wear protection, excellent cleaning power, and overall performance.

Recent Developments

• January 2023- Exxon Mobil, one of the world's largest oil and gas companies, reportedly invested USD 2 billion to expand the capacity of its Beaumont petroleum refinery.
• November 2022- Chevron Phillips Chemical (CPChem; The Woodlands, Texas) held a groundbreaking ceremony to expand its polyalphaolefin (PAO) unit at its Beringen, Belgium, facility. The expansion of PAO production capacity represented a significant regional investment and demonstrated CPChem's dedication to meeting the increasing global demand for PAO products.