Warren Distribution Opens New Location

Warren Distribution Opens New Lubricants Blending Plant In Houston, Texas

lo res - Front of New Warren Distribution Plant, Houston, TexasWarren Distribution announced today that it has completed and commissioned its fourth lubricants blending plant. This new plant in Houston, Texas, located at 910 Rankin Road just minutes west of George Bush International Airport, will supply Automotive, Commercial and Industrial lubricants throughout the Gulf Coast Region that will be shipped in bulk transports and packaged in totes, drums, and pails. It has initial annual blending capacity of 8 million gallons and is scalable to 20 million gallons with additional infrastructure investment. This addition increases the Company’s blending capacity to over 100 million gallons per year from plants in Iowa, West Virginia, Alabama and, now, Texas.

lo res - Side View of New Warren Distribution Blend Plant, Houston, Texas“We are very proud of the team that engineered and built this plant to include some of the latest innovations and technology that will make this most efficient plant in the Industry. And the quality of our products will be second to none,” said Donna Weeda, chief operating officer for operations. “We selected Texas for this plant because there is substantial growth in demand for lubricants due to exploding business and population growth in the Lone Star State. And Houston is the perfect hub for servicing the entire Texas market and surrounding States,” said Curt Knapp, chief operating officer for sales & supply. “Customer response has already exceeded our expectations. With this new plant, we will expand sales of our industry-leading quality products and superior service to existing customers with operations in the region and new local customers that we haven’t been able to serve in the past.”

About Warren Distribution
Warren Distribution is a family-owned business that was founded over 97 years ago in 1922 by the grandfather of Robert Schlott, the current Chairman and CEO. Now, it’s the largest private label blender and one of the largest independent motor oil, lubricants and automotive chemicals manufacturers and suppliers in North America. The Company is the private label supplier for some of the largest retailers, marketers and lubricants distributors in North America and has customers in more than 30 countries. It has the capacity to produce 100 million gallons of bulk and packaged lubricants from more than 1,100,000 square feet manufacturing and distribution facilities in Iowa, West Virginia, Alabama and Texas. The headquarters office is in Omaha, NE.

Atlas Oil and TOTAL Announce New Lubricants Partnership

Atlas Oil Company is now a TOTAL Specialties USA, Inc. authorized lubricants distributor, cementing Atlas’ vision of a single-source service model of premium lubricants and bulk fuel supply for its customers.

“We know our customers expect only the best products and services, which is why we now proudly offer TOTAL lubricants as part of our oil field services,” said Atlas’ President of Frac and Rig Fueling Michael Meredith. “As the partner of choice for many of the major E&P companies in the country’s largest shale plays, our partnership with TOTAL is a big win for everyone.”

TOTAL’S and Atlas’ successes are driven by many of the same values, including safety, collective responsibility, perpetual innovation and a family-like team spirit. TOTAL is the fourth largest oil & gas company in the world and is recognized internationally as a global energy leader. Their high-performance lubricants are designed to extend the life of equipment and ease the cost of maintenance and repairs.

Atlas’ lubricants distribution will fall under their oilfield services division in select markets with a focus on onshore drilling rigs, frac trucks, and gas compression units with supply capabilities to match customers’ consistent oil, grease, and hydraulic fluid needs. The company plans to expand their lubricants services nationwide and into their commercial fueling, retail, and emergency service divisions throughout 2018.

“We are extremely excited to partner with such an innovative company like Atlas,” commented Christophe Doussoux, Senior Vice President, Lubricants for TOTAL Specialties USA, Inc. “TOTAL has the industry-leading product line and Atlas brings years of excellence in customer service. I am confident this partnership will lead to immense growth for both parties.”

About Atlas Oil Company
Headquartered in Taylor, Mich., Atlas Oil is the inaugural Simon Group Holdings company. Since our founding in 1985, Atlas has grown through technological and operational innovation, all while maintaining our unwavering commitment to customer success. Atlas offers single-source solutions for fuel, transportation, and logistics and is one of the largest fuel distributors in the country, delivering over 1 billion gallons of fuel annually to customers in 47 states. We have an active real estate division and are engaged in transportation logistics and fueling including bulk, fleet, event, onsite, emergency response, and oilfield services.

About TOTAL Specialties USA, Inc.
Headquartered in Houston, Texas, TOTAL Specialties USA, Inc. is a part of the Americas Division for the Marketing & Services Branch of the TOTAL Group. TOTAL Specialties USA, Inc. offers a wide range of lubricant products including TOTAL Quartz synthetic performance engine oils. Our products are sold through a comprehensive network of distributors, direct channels and an online presence. In addition to a growing distribution network and evolving production capabilities, we’re committed to heightening our brand awareness through partnerships in motorsports. For more information on TOTAL Specialties USA, Inc. visit www.TotalSpecialties.com

Source: PR Newswire

Calumet Specialty Products Partners, L.P. Announces the Acquisition of Biosynthetic Technologies, LLC, Enhancing the Technological Capabilities of the Specialty Products Business

Calumet Specialty Products Partners, L.P. (the “Company”, “Partnership” or “Calumet”), a leading independent producer of specialty hydrocarbon and fuels products, today announced that the Partnership completed the acquisition of Biosynthetic Technologies, LLC (“Biosynthetic Technologies”). Biosynthetic Technologies is a startup company and developer of proprietary renewable technology focused on the conversion of sustainable plant oils into high-performance synthetic base stocks. These unique estolides exhibit exceptional qualities for high performance lubricants, while also meeting stringent environmental specifications for biodegradability, bioaccumulation and toxicity. Calumet plans to develop and commercialize these renewable esters at its existing esters manufacturing facility in Missouri. The acquisition of Biosynthetic Technologies was completed in partnership with The Heritage Group, a technology partner whose business model offers synergies with Calumet that will maximize the value of the acquired technology portfolio.

CalumetQuote4112018“The acquisition of Biosynthetic Technologies and its technological capabilities align very well with the Partnership’s specialty products-focused growth strategy, and our vision to be the premiere specialty petroleum products company in the world,” said Tim Go, Chief Executive Officer of Calumet. “This acquisition, alongside the recently announced opening of our new Research and Development facility in Indianapolis, are indicative of Calumet’s commitment to innovation. The technology and expertise we have acquired will help extend our existing esters business into new, forward-thinking product formulations with exceptional qualities for which the Calumet name represents.”

About Calumet Specialty Products Partners, L.P.
Calumet Specialty Products Partners, L.P. is a master limited partnership and a leading independent producer of high-quality, specialty hydrocarbon products in North America. Calumet processes crude oil and other feedstocks into customized lubricating oils, solvents and waxes used in consumer, industrial and automotive products; produces fuel products including gasoline, diesel and jet fuel. Calumet is based in Indianapolis, Indiana, and operates eleven manufacturing facilities located in northwest Louisiana, northern Montana, western Pennsylvania, Texas, New Jersey and eastern Missouri.

About Biosynthetic Technologies
Headquartered in Irvine, CA, Biosynthetic Technologies holds exclusive rights to patented technology that converts fatty acids found in plant and animal oils into high-performance synthetic oils that can be used in industrial lubricant, personal care and other chemical sectors. These “biosynthetic” base oils exhibit many superior characteristics compared to petroleum-based lubricant oils. Biosynthetic Technologies was a privately held company funded in part by multiple FT Global 500 companies. First-mover advantage and patented technology make Biosynthetic Technologies a market leader in the sustainable chemicals sector. For more information, visit www.biosynthetic.com.

Source: PR Newswire

Round 2 Lubricant Price Increase Summary

 

Company Announced Date Effective Date Increase
Sinclair Lubricants 2/12/2018 3/1/2018 up to 5%
CAM2 3/1/2018 3/24/2018 4 to 10%
Smitty’s Supply 3/1/2018 3/24/2018 4 to 10%
Pinnacle Oil 3/2/2018 3/19/2018 5 to 10%
Allegheny Petroleum 3/5/2018 3/24/2018 4 to 8%
Advanced Lubrication Specialities (ALS) 3/29/2018 6 to 9%
Sunoco 3/29/2018 6 to 9%
Chemlube 3/7/2018 3/26/2018 5 to 8%
Reliance Fluid Technologies (RFT) 3/7/2018 4/9/2018 4 to 9%
Sunbelt Lubricants 3/8/2018 3/21/2018 6 to 8%
PennStar 3/9/2018 3/19/2018 6 to 10%
Martin Lubricants 3/12/2018 4/16/2018 4 to 10%
Warren Distribution 3/12/2018 4/9/2018 5 to 8%
Maverick Performance Products 3/7/2018 3/26/2018 5 to 8%
Royal Mfg 3/13/2018 4/2/2018 3 to 8%
Omni Specialty Packaging 4/23/2018 5 to 8%
ExxonMobil 3/22/2018 4/23/2018 up to 10%
Warren Oil 3/23/2018 4/23/2018 3 to 8%
Chevron 3/28/2018 5/7/2018 up to 10%
Nu-Tier 3/28/2018 4/16/2018 6 to 8%
Total 3/29/2018 4/30/2018 3 to 5%
Shell 4/4/2018 5/7/2018 up to 10%
Phillips 66 4/5/2018 5/14/2018 up to 10%
 Safety-Kleen  4/5/2018  5/7/2018 up to 10%

Increase4112018R2
 CLICK FOR COMPLETE LIST OF LUBRICANT PRICE INCREASES IN 2018 ROUND 1 

Click on the Timeline Below to See All Effective Increase Dates in 2018

Increase4112018Big

JobbersWorld Announces Lubricant Pricing Reports

JWMiniBooks-3A must have report for manufacturers, marketers, buyers and others looking to understand price drivers and communicate the reasons for price increases to customers.

THE REPORTS provide insights and information on finished lubricant prices and an in-depth analysis of the cost drivers responsible for the changes in lubricant costs and prices in the US market.

The Finished Lubricant Pricing Reports provide lubricant manufacturers and marketers with an independent source of information and insights on price changes at the manufacturer and retail levels and the key drivers behind the changes. In addition to the influence of crude and base oil, the reports analyze the impact of changes in the cost of lubricant additives, transportation, packaging, labor, and others.

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Lubricant and Packaging Price Increases

More Price Increases in Round 2

Nu-Tier Brands announced a general increase of 6 to 8% on all its finished lubricants. The increase is effective April 16, 2018. Nu-Tier attributes the adjustment to the increasing costs of raw materials and manufacturing.

Total announced a price increase of 3 to 5% on its branded lubricants effective April 30, 2018. This increase is being driven by the continuing rise in base oils, additives and other materials used in the manufacturing of lubricants.

See the bottom of page for a complete table of all price increases reported by JobbersWorld in Round 2, 2018.

Packaging Cost on the Rise

DrumUpArrowMauser USA, manufacturers of industrial packaging solutions, announced a 7.5% price increase on steel drums and a 3.9% increase on the price of IBCs. Mauser attributes the increase to the escalating costs of steel with the enactment of Section 232. The increase is effective with shipments on April 25, 2018.

Based on JobbersWorld’s calculation, the increase adds close to $0.05 a gallon to the cost of lubricants sold in drums and kegs.

For those unfamiliar with Section 232, on March 8, 2018, President Trump exercised his authority under Section 232 of the Trade Expansion Act of 1962 to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports, with exemptions for Canada and Mexico, in order to protect our national security. The President’s Section 232 decisions are the result of investigations led by the Commerce Department, after review and comment by other relevant Federal agencies. Customs and Border Protection will begin collecting the tariffs on March 23, 2018.

Chevron Announces New First Source Lubrication Marketer LubeSource

LubeSource customers now have access to a variety of marketing materials and tools

Chevron Products Company, a division of Chevron U.S.A. Inc., maker of technologically advanced engine oils, lubricants and coolants today announced LubeSource is the latest First Source Lubrication Marketer for Chevron Canada Limited.

ChevQuote432018As a Chevron-branded First Source marketer, LubeSource is recognized as one of Chevron’s top-performing Delo, Havoline and Chevron Industrial Lubrication Marketers. The First Source designation indicates LubeSource is committed to being strategically dedicated to the long-term success of their customers’ business.

“Chevron’s First Source Lubrication Marketer program has been a great resource for recognizing leading marketers and developing business relationships. The addition of LubeSource under Chevron Canada’s umbrella is a testament to its success rate,” said Bob Stolz, GM Chevron North America Lubricants. “LubeSource already had a reputation as a top lubrication marketer and joining our First Source program confirms it.”

As part of the customer support, the Vaughan, Ontario marketer now offers an expanded lubricant product portfolio. In addition, LubeSource customers will benefit from:

  • Local warehouses with short lead times for better product management and availability
  • In-Field Technical Lubricant Specialists willing to visit customer locations for reviews
  • Regular promotions and programs, advertising and marketing support
  • Immediate and exceptional technical support through LubeTek

“Chevron has 100 years of advanced engine protection, extended service protection and unsurpassed performance records, so we’re happy we’ve earned the First Source designation,” said LubeSource Director of Sales John O’Donnell. “As a Delo, Havoline and Chevron brand ambassador, LubeSource is now the source for delivering industry leading durability, reliability and efficiency. The latest partnership with Chevron makes LubeSource an even more complete one-stop solution for all of your heavy duty motor oil (HDMO), passenger car motor oil (PCMO) and industrial lubricant needs.”

LubeSource customers can now order Chevron, Delo and Havoline lubricants through LubeSource and are backed by written warranties, including the Delo Bumper-to-Bumper Warranty Program.

About Chevron Products Company
Chevron Products Company is a division of an indirect, wholly owned subsidiary of Chevron Corporation headquartered in San Ramon, CA. A full line of lubrication and coolant products are marketed through this organization. Select brands include Havoline® and Delo® Chevron Intellectual Property LLC owns patented technology in advanced lubricants products, new generation base oil technology and coolants. For more information go to: http://canada.chevronlubricants.com

About LubeSource
LubeSource is a premier distributor and single-source solution for oil, lubrication and related fluids across the automotive, commercial, industrial and agricultural markets. Serving the Ontario market for over 20 years, LubeSource is the premier supplier of all package and bulk heavy-duty motor oils, featuring cutting-edge facilities, industrial experts and technical teams dedicated to maximizing customer operations. For more information go to: or http://lubesource.ca/

Sunoco LP Announces Definitive Agreement to Acquire the Wholesale Fuel Distribution and Terminal Business from Superior Plus Corporation

Sunoco LP LogoSunoco LP (“Sunoco”) announced today the execution of a definitive agreement to purchase certain assets from Superior Plus Corporation for approximately $40 million plus working capital adjustments. The assets consist of a network of approximately 100 dealers, several hundred commercial contracts and three terminals, which are connected to major pipelines serving the Upstate New York market. The wholesale fuels business sells approximately 200 million gallons of fuel annually through multiple channels. The three terminals have a combined 17 tanks with 429 thousand barrels of storage capacity.

The acquisition is consistent with Sunoco’s strategy of utilizing its scale to grow the core fuel distribution business and adding fee-based refined product terminals into the overall portfolio. The acquisition is subject to customary closing conditions and is expected to close in April 2018. The transaction is expected to be immediately accretive to Sunoco with respect to distributable cash flow.

About Sunoco LP
Sunoco LP is a master limited partnership that distributes motor fuel to approximately 9,200 convenience stores, independent dealers, commercial customers and distributors located in more than 30 states. SUN’s general partner is owned by Energy Transfer Equity, L.P.

VP Racing Fuels Named Official Fuel of Race of Champions

VP Racing Fuels, Inc., announced they have reached a multi-year agreement with Race of Champions management to secure Spec Fuel supply and series entitlements as Race of Champions Official Fuel, Lubricants, and Additives.

The Race of Champions is a sanctioning body presenting Modified and Stock Car racing on asphalt and dirt surfaces throughout the Northeast, with events in New York, Pennsylvania and New Jersey. The 68th annual Race of Champions weekend will take place in 2018 at Lake Erie Speedway in North East, Pa on September 27, 28 and 29. It is the second-longest consecutive auto-racing event in North America, second only to the Indianapolis 500. CLICK FOR MORE

Round 2 Lubricant Price Increase Summary

Company Announced Date Effective Date Increase
Sinclair Lubricants 2/12/2018 3/1/2018 up to 5%
CAM2 3/1/2018 3/24/2018 4 to 10%
Smitty’s Supply 3/1/2018 3/24/2018 4 to 10%
Pinnacle Oil 3/2/2018 3/19/2018 5 to 10%
Allegheny Petroleum 3/5/2018 3/24/2018 4 to 8%
Advanced Lubrication Specialities (ALS) 3/29/2018 6 to 9%
Sunoco 3/29/2018 6 to 9%
Chemlube 3/7/2018 3/26/2018 5 to 8%
Reliance Fluid Technologies (RFT) 3/7/2018 4/9/2018 4 to 9%
Sunbelt Lubricants 3/8/2018 3/21/2018 6 to 8%
PennStar 3/9/2018 3/19/2018 6 to 10%
Martin Lubricants 3/12/2018 4/16/2018 4 to 10%
Warren Distribution 3/12/2018 4/9/2018 5 to 8%
Maverick Performance Products 3/7/2018 3/26/2018 5 to 8%
Royal Mfg 3/13/2018 4/2/2018 3 to 8%
Omni Specialty Packaging 4/23/2018 5 to 8%
ExxonMobil 3/22/2018 4/23/2018 up to 10%
Chevron 3/28/2018 5/7/2018 up to 10%
Nu-Tier 3/28/2018 4/16/2018 6 to 8%
Total 3/29/2018 4/30/2018 3 to 5%

Timeline3282018R2
 CLICK FOR COMPLETE LIST OF LUBRICANT PRICE INCREASES IN 2018 ROUND 1 

Click on the Timeline Below to See All Effective Increase Dates in 2018

Timeline3302018Long

JobbersWorld Announces Lubricant Pricing Reports

JWMiniBooks-3A must have report for manufacturers, marketers, buyers and others looking to understand price drivers and communicate the reasons for price increases to customers.

THE REPORTS provide insights and information on finished lubricant prices and an in-depth analysis of the cost drivers responsible for the changes in lubricant costs and prices in the US market.

The Finished Lubricant Pricing Reports provide lubricant manufacturers and marketers with an independent source of information and insights on price changes at the manufacturer and retail levels and the key drivers behind the changes. In addition to the influence of crude and base oil, the reports analyze the impact of changes in the cost of lubricant additives, transportation, packaging, labor, and others.

clickmorejw

JW Introduces Lubricant Pricing Reports

JobbersWorld Announces Lubricant Pricing Reports

JWMiniBooks-3THE REPORTS provide insights and information on finished lubricant prices and an in-depth analysis of the cost drivers responsible for the changes in lubricant costs and prices in the US market.

The Finished Lubricant Pricing Reports provide lubricant manufacturers and marketers with an independent source of information and insights on price changes at the manufacturer and retail levels and the key drivers behind the changes. In addition to the influence of crude and base oil, the reports analyze the impact of changes in the cost of lubricant additives, transportation, packaging, labor, and others.

Must have reports for manufacturers and marketers looking to understand price drivers and communicate the reasons for price increases to customers.

clickmorejw

Total Lubmarine Introduces Newest Environmentally Acceptable Lubricant

Total Lubmarine has announced the introduction of a new grease product: BIO OG PLUS – an innovative addition to an already comprehensive Environmentally Acceptable Lubricant (EAL) range.

Specifically formulated for sensitive applications such as open gears and chains under high load, BIO OG PLUS mitigates the challenges of working in environments where water contamination is common.

On top of being an extreme pressure and adhesive grease, Lubmarine says, BIO OG PLUS’s biodegradable qualities allow owners, managers and operators of vessels to take a more environmentally considerate approach to lubrication. It is also a vital resource to those operating in areas requiring the use of EAL Lubricants, such as those working within jurisdiction of the US.

Anne-Sophie Vaucheret, Marine Technical Engineer at Total Lubmarine said of the new product: “We are very happy to bring a new product into our range – and this is something that our customers have been asking for. We pride ourselves on an ability to offer an end-to-end lubrication solution, and with BIO OG PLUS, all of our customer’s needs are covered.”
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HollyFrontier Corporation Reports Quarterly Net Income

HollyFrontier Corporation today reported fourth quarter net income attributable to HollyFrontier stockholders of $521.1 million or $2.92 per diluted share for the quarter ended December 31, 2017 compared to $53.2 million or $0.30 per diluted share for the quarter ended December 31, 2016.

HollyFrontier’s President & CEO, George Damiris, commented, “In comparison to last year, HollyFrontier’s significant financial improvement for the fourth quarter reflects both better refinery operations and the improved macroeconomic environment. Additionally, Lubricants and Specialty Products had a strong fourth quarter led by the Rack Forward Business. We are excited about 2018 based on our improving refinery reliability, our positive outlook for both product cracks and crude spreads, as well as the growth potential of converting a higher percentage of base oil sales into finished products.” MORE

On the Wire and in the News

Neste appoints Brenntag as its new NEXBASE Group III base oils distributor in Greater China

Car manufacturers go all in on electric cars, raising specter of peak oil demand

Gen III Oil Corp. signs Term Sheet for CAD$72 Million Secured Credit Facility

More Price Increases and Valvoline Announces New Product

Phillips 66 and Total Lubricants Announce Increases

Phillips 66 Lubricants announced it will raise finished lubricant prices by up to 5%. The increase is effective March 5, 2018. Phillips attributes the increase to recent increases in raw material costs.

Total Specialties USA advised its customers of a 4 to 8% price increase on TOTAL branded lubricants. This increase is effective February 26th. Total attributes the adjustment to escalation in the costs of base oils, additives, and other raw materials used in the manufacturing of lubricants.

Allegheny Petroleum announced a price increase of $0.25 a gallon for all of its lubricant products ordered on or after February 26th.  The price adjustment is attributed to industry wide increases in the cost of raw materials.

As of today, the list of companies JobbersWorld reported on that have announced lubricant price increases in 2018 is shown below:

Company
Announced Date
Effective Date
Increase
CAM2 1/12/2018 2/5/2018 6 to 10%
SOPUS Products (Shell Lubricants) 1/15/2018 2/19/2018 up to 5%
Advanced Lubrication Specialties (ALS)
1/16/2018 2/5/2018 6 to 10%
Sinclair Lubricants 1/17/2018 3/1/2018 up to 6%
Chemlube 1/18/2018 2/5/2018 $0.20 to 0.25/gal
Nu-Tier Brands 1/18/2018 2/19/2018 6 to 8%
Martin Lubricants 1/18/2018 2/16/2018 4 to 7%
Safety-Kleen 1/18/2018 2/19/2018 5 to 8%
Pinnacle Oil 1/19/2018 2/6/2018 6 to 10%
Royal Mfg 1/22/2018 2/26/2018 5 to 8%
ExxonMobil 1/22/2018 2/26/2018 up to 6%
Reliance Fluid Technologies (RFT) 1/22/2018 2/26/2018 5 to 9%
Chevron 1/22/2018 3/1/2018 up to 5%
Warren Distribution 1/24/2018 2/26/2018 6 to 9%
Smitty’s Supply 1/24/2018 2/12/2018 lubricants 6 to 10%
Greases 3cpp
Phillips 66 1/25/2018 3/5/2018 up to 5%
Total Specialties USA 1/26/2018 2/26/2018 4 to 8%
Allegheny Petroleum 1/26/2018 2/26/2018 $0.25/gal

Increase1262018Timeline

Valvoline Introduces New Modern Engine Full Synthetic Motor Oil

valvpic1262018Valvoline, a leading worldwide supplier of premium branded lubricants and automotive services unveiled another innovative new product with the introduction of Valvoline™ Modern Engine Full Synthetic Motor Oil. This new product is specifically engineered to protect against carbon build-up in Gasoline Direct Injection (GDI), turbo and other engines manufactured since 2012.

ScreenHunter_4115 Jan. 26 19.07“For over 150 years, Valvoline has been at the helm of product innovation, meeting consumer needs with smart science and solutions. Our team is leading the industry with the launch of Valvoline Modern Engine,” said Heidi Matheys, Valvoline chief marketing officer. “As part of our full synthetic portfolio, Modern Engine will combat potential carbon build-up in newer engines – an issue that degrades vehicle performance. Most consumers are unaware that the issue even exists, even though it has the potential to impact roughly 100 million newer vehicles on the road today.”

The company says that engines in vehicles 2012 and newer are built smaller and more efficient than ever. As a result, they run hotter, and are more susceptible to developing Low Speed Pre-Ignition (LSPI) knocking due to abnormal combustion, as well as fuel and oil related carbon build-up.  These issues could lead to power and fuel economy loss – and ultimately, engine breakdown.

Commenting on the launch of Valvoline Modern Engine Full Synthetic Motor Oil, Fran Lockwood – chief technology officer at Valvoline, said: “Valvoline Modern Engine captures key learnings from extensive research on how motor oil formulation – namely oil properties and additive composition – not only influence but can actually help prevent the formation of carbon deposits in the newest engine models.

For more information on Valvoline Modern Engine Synthetic Motor Oil, please visit ModernOil.com.

Why the Third Round of Price Increases?

 

Why the Third Round of Price Increases?

PIC11142017Rev2Price increases are not unusual in the lubricants business. In fact, this year alone we have seen three rounds. In most cases the increases are somewhat predictable since they are often driven by changes in the price of base oil. This is logical since base oil accounts for about 85% of the volume of material in motor oil and roughly 50 to 60% of its cost. The balance of the cost of goods belongs to performance additives, which are also impacted by higher base oil prices.

With that as a backdrop, the current round of price increases are understandable since there has been close to a 4% increase in the price of base oils since the start of the second round of price increases in April of this year. In addition, Lubrizol announced a temporary surcharge for its additives from September 27 through December 31, 2017 due the events surrounding Hurricane Harvey and the impact on the infrastructure of the petrochemical industry.

There are, however, other factors taken into consideration when price increases push through on finished lubricants; some having a very important impact on the third round of price increases. One in particular is the cost of freight.

Truck11142017The cost of freight climbed significantly this year due to a number of issues. The one with the greatest effect has, and is expected to continue to be, a severe shortage of qualified drivers. According to a report by the American Trucking Association (ATA), the driver shortfall may reach 50,000 positions by the close of 2017. Further, if the current trajectory holds, it’s forecast to balloon to nearly 175 thousand by 2026. Trucking companies are working to address the shortages by offering hefty sign on bonuses, higher compensation, and other perks and benefits to gain and retain drivers. In addition, they are pouring money into recruitment and training programs, all of which are driving up the cost of freight.

Freight costs are also ramping up due to regulations. In particular, the preparation trucking companies are implementing to assure compliance to the new federal regulation that requires the use of electronic logging devices (ELDs). In short, ELDs are digital logging devices that monitor driver hours of operation and help assure drivers adhere to the hours-of-service regulations (limits on the number of hours they can drive). In addition to the expense of planning, and the hardware and software required to implement ELDs, the regulations are said to exacerbate driver shortages by reducing availability.

Another impact on shipping costs, brings us back to August, when JobbersWorld reported on CSX Rail (the country’s third largest railroad) restructuring to rationalize infrastructure and consolidate operations. With this, CSX made regional cut backs in personnel and hump tracks, bringing its ability to handle between 60 and 80 cars a day in some yards, to as few as 35 or even 15 cars a day. Adding to the cut backs, CSX has also changed some of the shipping patterns, which sends some cars north before heading south, adding to delays. These factors encouraged blenders, distributors and others to find an alternative, yet more expensive and/or time consuming, means of transporting necessary products.

Importantly, increases in the cost of shipping impacts both the inbound and outbound freight charges incurred by lubricant blenders and distributors. As an example, higher freight costs mean blenders pay more to transport base oils from the rack to the blender’s lube plant. In addition, the freight costs to bring in additives increased. Distributors also pay more on inbound freight to transport finished lubricants from the blend plant to their storage and distribution facilities. On outbound freight, both blenders and distributors can incur higher shipping costs (when not FOB) to move finished lubricants from their warehouses to the end-user, retailer, or installer. And make no mistake about it, although a marketer operating a private fleet may not share the same cost burden as those moving freight by common carrier, costs can also increase as they compete to hire and retain drivers in the shrinking pool of qualified professionals. Furthermore, they too are seeing higher costs due to more stringent regulations.

But there is more.

bottles11142017Although higher base oil prices and freight costs have a big thumbprint on the third round of finished lubricant prices in 2017, increases in the cost of packaging materials, including steel, resin and paperboard, were also seen this year. As an example, Greif, a global leader in industrial packaging products and services, announced an increase on the price of steel drums of 5%, effective March 2017. Greif attributed the increase to escalating raw material and other input costs. Although not specific to Greif, some blenders say that where they used to pay $23 to 25 for a 55-gallon drum in 2016, they are now looking at prices closer to $30 a drum.

The price of corrugated boxes also increased significantly in 2017. There are a myriad of reasons for the increase including, an explosion at an International Paper factory at the beginning of the year that reduced US paper production by 5%. In addition, increased demand for boxes to fulfill e-commerce transactions, increases in export demand, higher freight costs, investment to meet regulatory requirements, and increases in labor and energy also has an effect. One of the more recent increases underscoring the higher price of packaging came when Georgia-Pacific reportedly announced in September a $50 a ton price increase on linerboard and a $60 a ton increase on corrugated to take effect on October 10, 2017

Although the price of resin used to manufacture plastic bottles is slowly returning to normalcy, production and supply line interruptions cause by Hurricane Harvey took its toll on resin prices. Polyethylene producers pushed through two rounds of price increases from August to October. When taken together, these increases totaled close to $0.10 a pound.

Adding to the higher cost of drums, pails, quart bottles, cartons and other packaging materials, blenders and distributors are also seeing the cost to procure these materials increase circling back to the higher freight prices.

So for those asking why we are seeing a third round of lubricant price increases in 2017, the answer is complex and goes well beyond increases in the price of base oil. It includes the higher cost of additives, transportation, packaging, labor, and others. These cost increases are real, and producers and distributors typically pass them on, and maybe a little more to improve their margins, by increasing the price of their finished lubricant if they want to stay in business and remain healthy.

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