Re-Refined Base Oil Market Size, Share & Trends Analysis Report By Group (Group I, Group II, Group III), By Technology (Clay Treatment, Vacuum Distillation, Solvent Extraction, Hydrotreating Process, Others), By End-User (Automotive Oil, Industrial Oil, Process Oil, Metalworking Fluid, Grease, Others) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2023-2031

Market Overview

The global re-refined base oil market size was valued at USD 6.42 billion in 2022. It is estimated to reach USD 11.15 billion by 2031, growing at a CAGR of 6.33% during the forecast period (2023–2031). The global market for re-refined base oil has grown significantly due to rising environmental CO2 emission reduction efforts, rising base oil demand, regulatory mandates, and a combination of incentives and penalties to promote re-refined waste oil.

Re-refining base oil removes impurities, such as fuel, soil, and water, from waste oil using vacuum distillation, clay treatment, hydrotreating, and solvent extraction technology. Waste oil is collected from garages, maintenance facilities, and the automotive and marine industries. It is then transported to a refinery and reprocessed to create group I, group II, and group III base oil.

Recycling and re-refining transform used oil into a high-quality base oil with comparable properties to virgin base oil, which can be re-refined indefinitely. This re-refined base oil can be incorporated with virgin base oil or used as a stand-alone lubricant in various industries, including the automotive, industrial, and marine sectors. The re-refining process is also less severe and uses 50% less energy than refining crude oil to produce base oil.

Market Dynamics

Global Re-Refined Base Oil Market Drivers

Increasing Country-wise Regulations

Numerous regional and federal governments have put in place a range of management and regulatory programs to promote the collection and refinement of used oil through rewards, laws, and fines based on the issue and the most effective ways to collect and manage used oil. For instance, Turkey's government imposes legislation while Italy offers significant subsidies to encourage the collection and re-refining used oil. Furthermore, in India, the government has made it mandatory for lubricant manufacturers to utilize 25% of re-refined base oil by 2023.

Therefore, increasing steps to reduce CO2 emissions on the environment, meeting the increased demand for quality base oil, and government mandates or a combination of incentives or penalties to encourage re-refined waste oil make major contributions to the growth of the global re-refined base oil market.

Rising Re-refining Capacity

The primary factors driving up demand for re-refining base stock and expanding its capacity are the need for high-quality base oil to protect the depleting crude oil supplies and rising government requirements to reduce CO2 levels in the environment. In addition, regulatory mandates regarding used base oil fuel the increased capacity of re-refining base oil. In developed countries such as the US, Western Europe (such as Germany and France), and Brazil, the industry has group II re-refined base oil capacity, and more re-refining plants are being added to meet the flourishing demand for base II group oil.

For instance, according to Marc Verfürth, CEO of Avista Oil AG, based in Uetze, Germany, the total capacity of re-refined base stock is 877,000 tons per year and is mostly group I. By 2025, the capacity is likely to increase. Thus, increasing re-refining capacity is expected to boost market growth.

Global Re-Refined Base Oil Market Restraint

Collecting Used Base Oil

One of the major challenges hampering the market's growth is the collection of used base oil. However, problems faced while collecting waste oil vary from country to country. For instance, used oil refineries in developed economies like the US, Germany, and Canada do not face large problems collecting waste-based oil due to well-established infrastructure and government regulations.

In developing economies such as India, the collection of waste base oil is a daunting task due to the penetration of a high number of unorganized generators, including car repair shops, motor pools, and lubricant shops that prefer selling waste oil for fuel or to dump it into the sewage. Government regulations are also hindering the collection of waste oil.

Global Re-Refined Base Oil Market Opportunities

Conserving Energy and Preserving Natural Resources

Production of base oil through re-refined processes does not use crude oil. Rather, used oils such as engine, hydraulic, automotive, and gear oils are collected and re-refined through different technologies, including vacuum distillation, hydrotreating, clay treatment, and solvent extraction technology. Thus, in this way, re-refining base oil reduces dependence on crude oil. It also saves energy, as producing base oil from re-refining crude oil requires nearly three times more energy than producing base oil through re-refining.

Dumping of used motor oil in sewage, lake, or ground results in the loss of aquatic life and weeds and adversely affects water treatment plants. However, the re-refined process collects used oil from garages, maintenance shops, automotive companies, and marine industries and prevents it from dumping into sewage, landfills, and waterways. Thus, the re-refining base oil process is reducing pollution levels globally, creating market growth opportunities.

Regional Analysis

North America Dominates the Global Market

Based on region, the global re-refined base oil market is bifurcated into North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa. 

North America is the most significant global re-refined base oil market shareholder and is estimated to exhibit a CAGR of 6.08% during the forecast period. The US and Canada are North America's major markets for re-refined base oil. The demand for re-refined base oil in North America is driven by stringent regulations for emission standards, better fuel economy, and the soaring sustainability trend. Thus, the re-refined base oil market benefits from the continuous growth of the construction, automotive, manufacturing, and packaging industries. In addition, the demand for re-refined base oil used in construction equipment has increased with the need for non-residential development and high consumer expenditure on home furnishings.

Construction spending will likely be a major market growth driver over the forecast period. In the United States, the construction sector was estimated to have a market value of USD 1.36 trillion in 2020. As per the data from the U.S. Energy Information Administration (EIA), the total floor area of commercial buildings is expected to reach 126.1 billion square feet by the year 2050.

Europe is predicted to exhibit a CAGR of 6.53% over the forecast period. Europe is one of the largest and most developed regions, home to countries such as the UK, France, Italy, Germany, and Spain. Since the Industrial Revolution, Europe has grown quickly in per capita income, standard of living, and adoption of innovation and technology. Therefore, it has led to world-class automotive, construction, furniture, and defense industries, driving the demand for re-refined base oil in the projected period. In addition, the presence of the regulatory body GEIR to promote the re-refining oil industry is supporting the market's growth. The construction sector is among the largest industries in Europe. It employs around 18 million people and contributes around 9% of the GDP, according to the data by the European Commission. Several projects, such as residential, non-residential, and civil engineering buildings, have been driving the market for the construction industry and, in turn, supporting the re-refined market growth in Europe.

Asia-Pacific is the most populated region globally, home to around 60% of the global population, with around 4.3 billion people. The region includes the world's most populous countries, China and India. Presently, the penetration of re-refined base oil is moderate. However, some countries, such as India, Australia, and Vietnam, depend highly on imported base oil to fulfill domestic demand. Therefore, governments across these countries have implemented several measures to promote the growth of re-refined base oil. For instance, Vietnam and Australia have implemented a used-oil collection law. In addition, the increasing lubricant consumption owing to the booming automotive, construction, and robust industrial activity supports the growth of re-refined base oil.

In the Middle East and Africa, three countries accounting for the major share in the re-refined base oil market are Saudi Arabia, Iran, and the UAE. The major factor contributing to the growth of the re-refined base oil market in the region is increasing government mandates to promote refinery industries. For instance, in Turkey, the government made it mandatory for lubricant manufacturers to use 8% of re-refined base oil in lubricant production. Increasing awareness of its benefits, such as conserving natural resources, preventing groundwater contamination and soil quality, and increasing construction activities, is also promoting the re-refining oil industry in the region.

Segmental Analysis

The global re-refined base oil market is bifurcated into group, technology, and end-user.

Based on group, the global re-refined base oil market is segmented into Group I, group II, and Group III. 

The Group II segment is the largest revenue contributor to the market and is expected to exhibit a CAGR of 7.71% over the forecast period. Group II base oils are more refined than group I, constitute less than 0.03% sulfur, more than 90% saturates, and have a viscosity index ranging from 80 to 120. These oils are manufactured through solvent extraction and hydrocracking. The base oil class's largest market is for Group II re-refined base oil, which is predicted to dominate the market in terms of value during the projection period. Due to low sulfur content, low volatility, and lower viscosities, automotive and industrial lubricant manufacturers prefer group II base oil over group I.

Furthermore, with the surging demand from the automotive sector for 0W-10 motor oils with specification ranges between ISO 32 and ISO 100, the demand for group II re-refined base oil is increasing as these specifications can be easily met without blending it with any other base oil.

Group I re-refined base oil is the least refined base oil class that constitutes more than 0.03% sulfur, less than 90% saturated components, 10% aromatics, and has a viscosity index more than or equal to 80 and less than 120. It is produced through vacuum distillation, clay treatment, and dewaxing technology. Refiners convert used oil into high-quality group I base oil to formulate lubricants for heavy industry, marine applications, oil engines, and greases. Over the past few years, the demand for group re-refined base oil has declined due to increasing environmental concerns and better fuel economy.

Based on technology, the global re-refined base oil market is bifurcated into clay treatment, vacuum distillation, solvent extraction, hydrotreating process, and others. 

The hydrotreating process segment is the highest contributor to the market and is anticipated to exhibit a CAGR of 6.53% over the forecast period. Hydrotreating is a widely recognized and commercially viable method employed in the petroleum industry to refine crude oil and manufacture transportation fuels. During this procedure, a substantial quantity of hydrogen gas is employed to eliminate undesirable impurities, such as sulfur, nitrogen, oxygen, and other similar substances. In addition, hydrotreating enhances the quality of oils by eliminating sulfur and nitrogen compounds and augments hydrogen content by saturating olefins and a portion of the aromatics. Three types of hydrotreating bed designs are fixed, moving, and fluidized. The fixed bed hydrotreating technique is a patented method that employs guard reactors to mitigate catalyst toxicity.

Based on end-users, the global re-refined base oil market is bifurcated into automotive oil, industrial oil, process oil, grease, metalworking fluid, and others. 

The automotive oil segment dominates the global market and is projected to grow at a CAGR of 6.72% over the forecast period. Automotive or engine oil comprises approximately 75%-85% of base oil and several additives such as dispersants, anti-wear additives, and detergents. The main function of automotive oil is to lower friction and wear and tear of the engine and clean the engine from sludges and detergents. Moreover, it reduces piston ring leakage, neutralizes fuel-derived acids, and cools the engine by transferring heat from moving components. Engine oils are offered in different viscosities in the market, including 10W30, 10W40, 15W40, and 5W40, in the categories of raw materials, including mineral-based, synthetic-based, and bio-based lubricants.

Industrial oil plays a vital role in the smooth functioning of any industry. It is applied to improve the performance of industrial machinery and tools from wear and tear, reduce friction, and protect them against damage during operation. In addition, it prevents corrosion of machine parts and avoids metal-to-metal contact among machine components, thus enhancing the efficiency of machinery and increasing its operational life. It is used across numerous applications, such as mining, turbines, and power generation. It is also used across food processing machines, aerospace, automotive, construction, oil fields, railroads, and textiles.

Recent Developments

• May 2023- AVISTA OIL AG, the global leader in sustainability, used oil collection, and re-refining, entered the Indian market through a strategic alliance with IFP Petro Products, a forerunner in the Indian used oil re-refining industry. The partnership intends to revolutionize India's used oil re-refining industry by introducing cutting-edge technologies and environmentally responsible work practices.

• May 2023- Jaguar TCS Racing and its longtime partner Castrol set out to test and demonstrate sustainable solutions and circularity. At the Monaco E-Prix, the team ran a re-refined Castrol ON EV Transmission Fluid in its cars. It became the first motorsport team in the ABB FIA Formula E World Championship to utilize a circular transmission fluid.