"All of our new products are now designed with the possibility to be ‘Made In’ our region; it minimizes the exposure to supply chain disruptions and translates to a higher value to our customers in the form of security of supply and shorter lead times."
Could you share the latest developments at Afton Chemical (APAC) in the past year?
Afton saw high growth numbers in 2021, particularly in ASEAN countries and South Korea. The first half of 2022 was robust in China as car sales spiked, but the second wave of the pandemic dampened consumer sentiments and hence slowed spending.
We’ve continued to invest, both in our assets and in our teams, and we are pleased to have completed our Gasoline Performance Additive expansion at our Singapore Chemical Additive Manufacturing Facility, a project we’ve kicked off and carried out throughout the pandemic, ultimately delivering on time, on budget, and with an exemplary safety record.
What is underpinning demand for gasoline performance additives (GPA) in APAC?
The two key drivers boosting the demand for GPA in APAC are the region’s adoption of cleaner fuels, with which comes the recognition that GPA and detergents are key enablers toward increased fuel economy and reduced emissions, and rising car ownership. New car owners are keen to protect their vehicles by investing in premium fuels at the pump. As a result, gasoline retailers also invest in premium gasoline performance additives that clean and prevent deposits buildup on engines.
Both national and international oil companies are launching quality gasoline brands in China, Indonesia, Thailand and Malaysia with increased octane grades and premium GPA to offer differentiated value to their customers.
The newly added capabilities of our GPA blending unit in Singapore will help to meet the increasing demands for GPA in the region.
How is the pandemic reinforcing Afton’s “Made In, Made 4” strategy?
Our ‘Made In’ strategy not only optimizes and streamlines supply chain solutions, it also aims to maximize trade and localization opportunities. All of our new products are now designed with the possibility to be ‘Made In’ our region; it minimizes the exposure to supply chain disruptions and translates to a higher value to our customers in the form of security of supply and shorter lead times.
Over 80% of the products we sell to Asia are ‘Made In Asia’ and designed based on key insights and requirements ‘Made 4’ the needs of Asia.
Besides localizing the manufacturing process, we are also increasing local inventory levels and our raw material sources. Last year’s winter disruptions in the US probably had an even bigger impact on the petrochemical industry than Covid itself. Such events dramatically evidence the interdependencies in the market and further support the ‘Made In’ approach as a business continuity plan alongside the other benefits it provides to customers.
How is the volatility in the oil price impacting the outlook for petroleum additives companies?
Like every other industry, it all comes down to the ability to pass on cost inflation to the value chain, subject to demand dynamics and customers’ willingness to pay. The difference between the CPI (consumer price index) and the PPI (purchasing power parity) has been a lot narrower in North America compared to China, where the gap is the biggest. Hence, the ability of these markets to pass on costs is more constrained compared to America or Europe at this time.
How do you observe the pace of transition to e-mobility?
As we all look to a more sustainable future, the focus on emission/waste reduction is constant, and e-mobility will be part of the solution. Our business focus is about keeping things moving, so even if the solutions for moving parts change, the need for increased efficiency of equipment and protection against wear will remain in place. Afton is a leader in renewable energy solutions, supplying industrial gear oil additives for wind turbines, and electrified transmission fluids (ETFs) also for the electrification of transmissions.
Volume-wise, e-solutions-based lubricants may not replace the demand of combustion engine-based solutions. Yet, we see higher demand for more efficient combustion engines and potentially hybrids.
We invest in all these alternatives, with a focus on cleaner energy, cleaner vehicles, cleaner mobility, and the many ways to get there.
Do you have a final message?
Afton’s commitment remains to develop cost-effective and differentiated lubricant and fuel additive solutions. This, in addition to our integrated supply network, ensures that the total solution combining “Made 4” and “Made In” will help provide our customers with a competitive edge in their markets.