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Cheaper base oil prices help boost lube blender’s profit margins

Malaysia’s Hiap Huat Holdings Bhd wants to expand its lubricant business. Managing Director Chan Say Hwa told SunBiz that better profit margins from selling finished lubricants can be obtained nowadays as crude oil prices continue to hover at around USD 50 per barrel, from a peak of more than USD 100 per barrel.

“At the moment, fuel oil is the major revenue contributor, and in fact, none of the other segments’ revenue can easily overtake it but due to the existing oil price situation, the chance for us to move to lubricants is higher,” SunBiz quoted Chan as saying.

Fuel oil represents 50% of Hiap Huat Holdings Bhd’s revenue, while waste oil collection contributes another 20%. Lubricants currently only contributes 10%, but Chan says his target is to boost this to as much as 30%.

Cheaper base oils, which make up between 80-90% of a finished lubricant formulation, have boosted profit margins of lubricant blenders like Hiap Huat Holdings. Hiap Huat Holdings blends lubricants at a plant in Pulau Indah. Chan said the plant can expand production anytime.

The company sells lubricants in Malaysia, as well as in Korea, and recently has had inquiries from Vietnam and Thailand.