The past 18 months of rationalisation in the oil and lubricant industry has culminated in three main supply groups emerging from the pack, with specialist longwall lubricant suppliers forming alliances with oil majors to gain access to multi-million dollar contracts.

The tendering and supply of oils and lubricants is increasingly moving towards single major contracts covering all the fuel and lubricant requirements of mining companies, from vehicle fuel and lubricants to hydraulic fluids. This development has been partly driven by the consolidation which has swept the coal industry in recent years, giving rise to major mining houses with massive bargaining power that see benefits in rationalising several suppliers into a few.

World leader Fuchs supplies the majority of longwall fluids in Australia and 104 longwalls worldwide. In July 2000, oil major BP bought Castrol, which currently supplies fluids to three Australian longwall mines. Producer of Quintolubric longwall fluids, Quaker, supplies its fluids to over 40 longwalls, including 10 Australian mines, most of which are supplied through an alliance with oil giant Shell (which does not produce longwall fluids). Also trying to enter the market with its range of specialised gearbox oils is Conoco.

This new type of alliancing has pros and cons, however. On the one hand, it has squeezed out small, niche specialist oil and lubricant producers. And on the other it allows mining companies to broker highly competitive deals with fuel, oil and lubricant suppliers.

At present contracts out to tender in the marketplace for the supply of oil and lubricant packages to three large coal companies are believed to be worth in excess of $15 million (excluding fuel).

One large coal company, currently in negotiation with lubricant and fuel suppliers for a contract encompassing all its operations, has in fact elected to separate the fuel component from the lubricant component in its dealings. The reason, according to one group purchasing manager, was that while fuel supply was simple and fairly standard, lubricants were much more complex. Partisan preferences for particular products from different mine engineers, specialised equipment requirements, and different after-sales service packages, were some reasons cited for the greater complexity in purchasing lubricants.

The purchasing manager said he had broken the underground lubricant package down into categories with ‘specials’ or exotics a separate group. These include specially branded products claimed to deliver enhanced results.

Under the proposed terms of the contract mines will be able to elect to continue using specials and it will be up to the fluid supplier to try to convince the individual mines to change. It has been easier to allow those mines with operational experience in some of the specialised products to continue using them, he said.

Meanwhile, the battle for market dominance is raging between the various suppliers, with some industry observers remarking that the market has never been this competitive. The supply of fluids to longwall roof supports alone is believed to be a $6 million market in Australia.

Quaker general manager, Harold Kraus, said his company’s strategy for the longwall market is to offer a minimum number of products, approved by all original equipment manufacturers (OEMs) which were at the forefront of environmental compatibility and overall system performance.

Market leader Fuchs has the largest product portfolio in the market.

“Customers using Fuchs fluids in Joy faces use less on an annualised basis,” said Bernie Michaelson, a Fuchs manager, who added that an average Fuchs mine consumed 105,000 litres per annum of longwall fluid, as opposed to an average 232,000lpa by mines using other products, according to recently published tenders. This average excludes Australia’s largest single consumer, not a Fuchs mine, which has leg seal related issues.

Castrol technical manager, Gary Hollingshed, said Castrol’s presence in the longwall market has been strengthened by the BP acquisition. The main advantage is the ability to offer a complete package, with ancillary cost savings. Other synergies come from access to technology improvement across a range of sites. Hollingshed said Castrol had extensive R&D resources in Australia, which had enabled the company to locally develop new generation longwall products such as Anvol SF 2000.

Another development in the fluid and lubricant market over the past 18 months has been a change in the relationship between OEMs and fluid suppliers, particularly OEMs that produce roof supports.

The issue arose when solenoid valves in some Joy Mining Machinery roof supports in Australia began failing due to sticking. According to Joy technical director, Brad Neilson, Joy was extremely proactive in addressing the problem and worked with oil and lubricant suppliers to find a solution. What was detected was that electrolytic action was releasing nickel ions into solution which were combining with fluid components and forming deposits, which was causing the sticking.

A fluid solution to the problem has been subsequently established by fluid suppliers to overcome the problem in-face. And Joy has developed a new oil-filled solenoid which is not susceptible to the problem, as well as developing a minimum fluid test specification (CTR2-14) for mines to test fluids designated for Joy roof supports. The reasoning behind this was that once equipment is in service, the OEM no longer has control over a wide range of factors such as maintenance practices, what fluids are used and how they are used, and water hardness or softness.

“This paradigm shift has seen OEMs moving away from recommending fluids,” Fuchs’ Michaelson said. “The onus has shifted to the mine and the fluid supplier.”

Fuchs’ response has been to inform affected customers of available alternatives, such as the newly introduced Solcenic 2020, already in four Australian longwall mines and 10 internationally. This particular fluid had several advantages over others, according to Michaelson, including cost effectiveness, higher lubricity and being biodegradable.

Meanwhile, the major coal company’s group purchasing manager, who wished to remain anonymous, was struggling with differentiating between the various products offered during tender. “The mine suppliers keep giving me words like ‘enhanced’ or ‘greater’ performance. I want to see comparative numbers, that shows actual cost improvements,” he said.