How do you foresee the demand of lubricants (greases, hydraulic oils, engine, transmission oils) from the construction equipment and mining sector in the country? Do you find the demand both value and volume driven?
The Earthmoving and Construction Equipment (ECE) industry grew at a robust pace over the past few years (19% CAGR during 2009-2012), however, it de-grew by 12% in 2012-13. In the last year equipment sales dropped owing to a slowdown in investments, amid weak demand, and delays in execution of infrastructure projects because of land acquisition and clearance issues. But this year, we have positive news in store for the sector; an investment of `37,880 crore has been parked for roads which is up by 13% YoY, NH allocation up by 20% YoY and state road up by 12% YoY.
On the construction side, infrastructure projects are going to be the major contributor. Overall, during the five-year period from 2013-14 to 2017-18, construction investments are expected to grow at a CAGR of about 8 percent. In the industrial segment, growth in construction spends is expected to be slower, as capacity expansions in sectors such as oil and gas, metals, cement and automobiles will remain sluggish over the next 5 years.
On the volume side, as per a recent study conducted by IECIAL and CII along with Accenture, Indian CE industry has the potential to grow six to seven times—from total revenues of US$3.3 billion in 2010 to US$22.7 billion in 2020 with multiple benefits to the economy. Hence, equipment sales volume is expected to increase from over 60,000 units in 2010 to 330,000 in 2020.
Meanwhile the Mining industry witnessed a decline in growth during 2012–2013, due to lack of new projects. Due to the cancellation of the allotted mining blocks, the industry witnessed a downward momentum. However, with the ban on iron-ore mining having been lifted and firms obtaining relevant clearances and resuming production, the mining industry is likely to show an upward momentum. CRISIL foresees that in 2014-15, the GDP growth is expected to pick-up to 6.0 per cent, leading to recovery in industry on the back of higher external demand. Kline projects that total lubricant consumption in the Indian mining sector will grow from 31.2 kilotonnes in 2013 to 32.1 kilotonnes in 2018, a CAGR of 0.6%.
However, apart from the sector volume growth trends, equally important is a growing trend to focus on the total cost of ownership as companies look to increase competitiveness through higher productivity of equipment and reduced downtime for maintenance. This is also leading a shift of demand towards the more value oriented areas of the lubricants portfolio including services that can help deliver these benefits. Hence, we foresee both a growing demand of lubricants and also a shift towards higher quality lubricants and greases that reduce the overall cost.
To address both the requirements, especially the second one based on the fact that the modern engines are electronic in their entity have higher drain out intervals, enhanced combustion and lesser carbon deposits, ensuring higher availability of machines, how are you strengthening your R&D support and collaboration with the original equipment manufacturers manufacturing construction equipments? Please provide details of your engine condition monitoring support initiatives.
Shell Lubricants engages with the customers at the initial stage of product evaluation and works together towards co-engineering the best lubricant & services suiting their requirements so that optimal performance can be obtained. When a new equipment is launched either due to environmental norms or technological changes, it enforces the equipment requirements to change & Shell Lubricants works with OEMs to develop lubricants to address these.
For providing the best customized solutions to our customers, we have a host of services that we offer for example, our oil experts - Shell Lubricants Technical Advisors can make a thorough assessment of equipment and oil usage at a customer's site to recommend the right products from Shell Lubricants portfolio for maximum benefits to save on total cost of lubrication. This service is called LubeAnalyst service which identifies potential failures before they become critical. Shell's laboratories analyse samples of the lubricant taken from the machines to identify signs of increased wear, the presence of unwanted contaminants and increased rates of degradation. It helps to monitor, benchmark, improve and save costs owing to frequent breakdown of machinery. Shell LubeAnalyst then generates a report to provide a detailed analysis of the equipment. Along with the test results, it also provides a diagnosis which explains the different values and gives advice specifically tailored for the machinery. We also offer LubeVideoCheck service which inspects customer's engines and suggests on the need for overhaul/maintenance etc.
What are the new value proposition/ offerings in your lubricants for the construction and mining equipment? What are your present brand of lubricants for the construction and mining equipment sector in India? How will the value proposition minimize the total operating costs of the equipment?
Apart from these, few examples of cobranded products for the construction and mining sector include Shell Putz Premium HO 68 with Putzmeister and Tellus 2HF 68 SS with Schwing Stetter. We also have a GPO with Komatsu by the name of Komatsu genuine oil.
Lubricants can have a big impact on the operations of customer's business by lowering the total cost of ownership. Choosing, using and managing them correctly can bring significant rewards in terms of improved efficiency and profitability. One of the areas where we work closely with our customers is to demonstrate to them the benefits they can achieve.
There are several other benefits that Shell Lubricants offers. To be brief they add savings on maintenance cost and savings on overhauling cost. They help to extend Oil and Equipment Life and also reduce operating costs.
What are the drain out intervals of your lubricants (engine, hydraulic oils and greases) for the construction and mining equipment?
The construction equipment sector needs engine oil, hydraulic oil, transmission oil and grease. These are the four categories of lubricants that are used in construction equipment. Traditionally, people have been using products made according to the industry standards and specification but might not be getting the desired performance.
Customers are now demanding lubricants, across all categories, with enhanced Oil Drain Interval (ODI) and fuel efficiency, due to increasing costs, hence reducing the cost of ownership.
When it comes to defining ODI's it is very subjective. Oil Drain Intervals & Re-greasing Intervals are determined by OEMs based on the specific needs of their hardware, the duty cycle and the operating environment (dust, temperature etc) amongst other things. However drain intervals can be optimized based on how these variables affect the fleet of a particular customer. This is where lubricant experts from Shell work closely with the construction and mining customers understanding and monitoring their fleet operations by a combination of specialized services such as Shell LubeAnalyst (Shell Lubricants' unique oil and equipment monitoring service) and Shell LubeVideoCheck (engine inspection service from Shell Lubricants).
To address the volume based requirements, are you adding capacities of your blending facilities. Where are your blending facilities located presently for lubricants along with the storage facilities and depots?
We have a state-of-the-art lubricant oil blending plant in Taloja near Mumbai which was established in 1997 and is spread over an area of 16 acres. The plant feeds into regional distribution centers (RDCs) to distribute to 12 depots which cater to respective geography for direct customers and channel partners. We also have third party blending facilities and a wide network of blend plants across the globe from where we source product. What is more important than the number or the location is the quality of service and reliability as a supplier that we provide. Our performance indicates that we deliver >99% of the products on time and in full (OTIF) and our monthly feedback survey indicates very satisfied customers which gives an indication that we are leading the industry in service provided.
To support the requirements of construction equipment and mining sector, how are you placed in your distribution network and strategic stock points for providing the lubricants? Are you expanding your network? What are the initiatives being taken to strengthen your brand so as to ensure brand recall.
Shell Lubricants has a very strong distribution network with a manufacturing plant at Taloja, near Mumbai which is feeding to 4 regional distribution centers (RDCs) to distribute to 12 depots catering to respective geographies for direct customers and distributors. Our distributors are well placed to cater to the consumers through retail counters. Also, the distributor network is ever evolving to reach out to more and more geographies and customers.
Shell Lubricants undertakes several initiatives to strengthen their brand in the B2B space. We organise big events at number of occasions centered around operational level implications of technology, challenges that customers are facing and how can our products provide suitable solutions to overcome these issues. For example, following the success of the first two editions of Shell's Global Lecture Series at Imperial College, London, and Tsinghua University, Beijing, Shell brought together automotive industry experts at the third edition of the Shell Lubricants Technology Lecture today in India at the Indian Institute of Technology (IIT) Madras, Chennai. Here speakers emphasised cross-industry co-engineering as the fastest route to optimising fuel efficiency in lubricants for vehicles. The event was attended by leading automotive and engineering experts in India as well as IIT Madras faculty and students.
We participate in various technology/trade exhibitions such as Excon to showcase our technologically superior product ranges and solutions. We also engage in PR activities regularly to keep the industry apprised of our new endeavors and achievements. Our other initiatives also include, Metal Technology Forum, Technology Seminars with OEMs, National Synthetics Lubricants Seminar etc.