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October 11, 2005

Marine lubricant prices set to soar

Worldwide marine lubricant supplies are tightening and prices are set to rise.

"Recent events, even before Hurricane Katrina, and the force majeure declarations made by many suppliers after the hurricanes, have shown how tight the worldwide situation is," says Andrew Knox, Head of Marketing at TOTAL Lubmarine. "This is due to a long historical period of low and decreasing margins which have discouraged the industry from investing.

"With the 2004 and 2005 increases in crude oil and lubricant raw material market prices, industry profitability has become worse still, and the incredible acceleration in cost increases in recent months puts the industry in an unprecedented position of vulnerability," says Knox. "Since July, base oil price costs have increased by between 24 and 35 percent, depending on the product.

"Our current estimate is that we need to increase the end price of marine lubricants by between 20 and 30 per cent before the end of the year, just to compensate for the recent increases. If this is not achieved, the short and medium-term outlook for the supply of marine lubricants looks bleak."

Lubmarine is the worldwide maritime lubricants network of oil major Total. It supplies the world's shipping fleet though a global network covering 700 ports in 700 countries.

For more than two months, Lubmarine's logistics teams have operated as what it describes as a "crisis management cell", monitoring the worldwide supply position on a daily basis. As a result, up to now, Lubmarine has been able to serve all its customers and to supply all contracted vessels. It continues to work closely with engine manufactures during the supply crisis to find lubrication solutions, where appropriate, that will allow shipping companies to continue to burn fuel with a wide range of sulfur content without the risk of increased engine wear.