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HD OEM and Lubricant Trends
May 2010
Presentation Topics
Market data and OEM trends Emissions reduction and devices
Lubricant trends API categories and new developments HDEO market trends
HD OEM Market and Trends
Market dataHD OEM Market
HD Market: “Global” Production Position
September 30, 2009Fuels and Lubricants, Bengt Otterholm
4
67
71
74
88
96
99
112
130
175
207
0 20 40 60 80 100 120 140 160 180 200 220
Daimler
Volvo
Tata
Paccar
CNHTC
FAW
DongFeng
MAN
Scania
Iveco
1 000 units
• Volvo 96• Renault 44• Nissan Diesel 18• Mack 17
• Mercedes 122• Freightliner 52• Sterling 14• Fuso 14• W. Star 5
• DAF 52• Kenworth 38• Peterbilt 22
Other• Shaanxi China 60• Foton China 57• Ashok L. India 56• Internat’l USA 35• Kamaz Russia 28• Hino Japan 30• Chongqing China 24• Maz Russia 21• Isuzu Japan 18
Produced Heavy Duty Vehicles – 2007 (estimated)
HD Market: Engines – On Road
Truck sales remain at historic lows with minimum pre-buy occurring prior to US 2010 emission limit requirements. MY2010 trucks will cost up to $10,000 more and, most, will require use of diesel exhaust fluid (DEF).
HD Market: Engines – Off Road
Off road engine sales are also remain low, but are expected to rebound as US Interim Tier 4 emission limit requirements phase in from 2011 – 2014. I Tier 4 limits will require most manufacturers to use cooled EGR and DPF strategies.
HD OEM Market and Trends
Market data
OEM trends Emissions reductions
HD OEM Trends
Emissions: EPA 2007 Rule
Requires reductions of 95% in NOx and 90% in Particulate Matter (PM) emissions from HD Diesel Engines
1998Particulates(g/hp-hr)
0.10
3NOx (g/hp-hr)
0.01 2 4
2002
0.02
CI-4 CH-4
2.5
CJ-4
Use of EGR Increase EGR Rate
Po
st T
reat
men
t D
evic
es
2007~2010
Emissions: Global Emissions Regulations
Emissions: Impact on HD Fleet in Europe
Quick transition to new engine types Euro III introduced in 2002
Euro IV introduced in 2006 – 1/3 of the
market in 2 years
Euro V to be introduced in 2009
New engines = new requirements Increasing demand on lubricant
performance
Source : ACEA / Afton estimate
Trucks market share (>16t)WE 2008
Emissions: EURO VI Technical Solution
All OEMs will need DPFs and SCR to comply with Euro VI
Different strategies how TC and EGR are used
All OEMs need mid/low SAPS oils
Major impact on oil robustness and oil drain intervals
HD OEM Market and Trends
Market data
OEM trends Emissions reductions
• Devices– EGR
NOx reduction
HD OEM Trends
HD OEM Market and Trends
Market data
OEM trends Emissions reductions
• Devices– EGR– DPF
Particulates reduction
HD OEM Trends
HD OEM Market and Trends
Market data
OEM trends Emissions reductions
• Devices– EGR– DPF– SCR
NOx reduction
HD OEM Trends
HD OEM Market and Trends
SCR
HD OEM Trends
HD OEM Market and Trends
Market data
OEM trends Emissions reductions
• Devices• Impact on lubricant
HD OEM Trends
HD OEM Market and Trends
HDEO Trends
API HDEOHDEO Trends
HDEO: API “C” Category History
Normal-Sulfur Fuel
APICF-4
Low-Sulfur Fuel
1988 1991 1995
Year of API License
Oil Quality Levels
2002
API CH-4Low- & Normal- Sulfur Fuel
1998
OEMSpecsfor HigherSoot Levels
API CE
API CG-4
2006
CI-4Exhaust Gas Recirculation (EGR)
1999
CJ-4 Ultra-Low Sulfur Fuel (EGR & DPF)
HDEO:EPA 2007 Impact of Oil Formulation
ASH = 1.0 %S = 0.4 %P = 0.12 %
Volatility = 13 %BO : Gr-II
ASH = 1.2-1.5 %S = No limitP ~ 0.14 %
Volatility = 15 %BO : Gr-I & Gr-II
CI-4/CI-4+ Lubricant CJ-4 Lubricant
ACEA E9-08
API Category No new license Date obsolete
CF-4 01 Jul 2007 30 Jun 2008
CG-4 01 Sep 2008 31 Aug 2009
CF-2 29 Jul 2009 01 Feb 2010
CF 30 Dec 2009 30 Dec 2010
EMA Update (December 2009)
API Category Licensing Update
Oil and water clearly separated
Oil and water clearly separated with layer of emulsion still visible
API CF API CF API CG-4 API CH-4Old Add Pack
API CH-4New Add Pack
API CI-4 API CI-4 PLUS API CJ-4
No oil-water layer visibleSolid emulsion Source: Caterpillar presentation to API
DEOAP, August 2008
EMA Update (December 2009)
Caterpillar Emulsion Test Field testing to correlate laboratory results to field The O-West bench test will be set up at a third party laboratory
and an ASTM test method will be pursued
EMA Update (December 2009)
EMA Concerns EMA concerned about shear stability EMA concerned about EOAT shift (not supported by SP data) EMA now has a new concern about oil filter plugging (using
standard oil filter) Fuel economy remains an active topic ( less than 3.5 HTHS?)
Preparing for next HDEO Category
Next Generation HDEO API CJ-4 summary
• It took almost five years to develop CJ-4 (4Q2002 to 4Q2006) at a total cost of ~$5.5 MM in total test cost (not including manpower).
Drivers for a new category in 2014-2015:• Fuel Economy for CO2 reduction (which may include lowering the J300
HTHS)• Replacement of Existing Engine Tests• Biodiesel Test (B20?) • Chemical Box (0.1 wt. % P?)• Turbo deposit test?
Potential impacts include a movement to lower viscosity grades with need for enhanced oxidation & corrosion control
HDEO Trends
API HDEO
Global HDEO demand
HDEO Trends
Strong Growth in Asia-Pacific: China projected to have highest growth (2x global avg.)
EMEA growing just under global average: E. Europe projected to have highest growth, followed closely by M.E. and
Africa W. Europe flat
N.A. flat/decreasing
L.A. growing at global average
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
-1.0 0.0 1.0 2.0 3.0 4.0 5.0
3,000Kilotonnes
% Growth
North America
3,000Kilotonnes
EMEA
Asia-Pacific
Latin America
Overall Market Demand is INCREASING
0
2,000
4,000
6,000
8,000
10,000
Kilotonnes
2007
L.A.
N.A.
A-P
EMEA
8,543
2014
L.A.
N.A.
A-P
EMEA
9,656
CAGR
Global: 1.80%
Asia-Pacific: 3.50%EMEA: 1.70%
Latin America: 1.80%
North America: -0.20%
Global HDEO Demand Projection
0
2,000
4,000
6,000
8,000
10,000
2007
15W-40
10W-4010W-30
Other Multigrade
Other Monograde
SAE 40
SAE 30
8,542.60
2014
15W-40
10W-4010W-30
Other Multigrade
Other Monograde
SAE 40
SAE 30
9,656.40
VIS Grade CAGR
Other Monograde 1.40%
SAE 40 1.80%
SAE 30 0.90%
Other Multigrade 6.00%
15W-40 2.20%
10W-40 0.50%
10W-30 -2.00%
Global HDEO Demand Projection by VIS Grade
Highlights:• 15W-40 has most volume demanded of any VIS grade• Growth rates for multi-grades are higher than growth rates for
mono-grades
0
2,000
4,000
6,000
8,000
10,000
2008
All Other(CC/CD/CE/CF2)
CG4/CF4
CH4
CI4/CI4+CJ4
7,296
2013
All Other(CC/CD/CE/CF2)
CG4/CF4
CH4
CI4/CI4+CJ4
7,741
CAGR
Total 1%
All Other -5.40%
CG4/CF4 3.40%
CH4 4.90%
CI4/CI4+ -1.40%
CJ4 26.30%
Highlights:• The Global API Market is changing:
-Demand will see a shift to more recent API specs and higher performance HDEO
Lubricant Additive
0
100
200
300
400
0
5
10
15
20
25
30
All Other
2008
2013
264
189
CG4/CF4
289
353
CH4
124
165
CI4/CI4+
209192
CJ4
18
72
11.30 12.10 12.30 14.40 14.90
Growth (CAGR)
Treat Rate %
Global HDEO Demand Projection by API Specs
Summary
Emissions reduction is biggest driver
Use of aftertreatment devices require special lubricant properties Low SAP oils Improved robustness to maintain ODIs
Increased use of biofuels
Trend to global specifications
Trend towards multigrade and higher performing oils