Business Background
- The Mining industry, which accounts for almost 11% of Australia’s GDP, is the largest consumer of commercial lubricants in the country, (followed by the road freight trucking sector).
- Castrol is the market leader in terms of volume share and has built a strong position in the Mining sector in Australia over 30 years, enjoying noticeable growth in recent years, through lockdown.
- Castrol Mining has significant industry knowledge, supply capability and client-base but is also aware there is a business imperative to explore now what is needed to stay relevant in this evolving sector in coming years.
- The Mining team in Australia asked Castrol Global for support in Q4 2023 to understand what is needed to stay relevant in Mining in coming years. The expressed aim was to avoid ‘failing forward’ whilst doing business as usual and meeting fiscal & growth targets
- During our engagement, the project was widened out from AU - meetings were held with Castrol Mining teams in other countries, Middle East, KSA, ID, IN, TR, US, ZA.
Study Participants
15 Mining companies were interviewed in five markets. A larger focus on Australia. And Procurement.
Australia n=7
Participants:
- OEM Construction Aftersales Manager & KAM.
- Contracts & Procurement GM & Manager.
- Category Specialist Buyer
- Category Contracts Manager
- Asset Management Lead
- Procurement Lead
- Global Procurement
Indonesia n=2
Participants:
- Procurement Co- Ordinator
- Head of Plant
South Africa n=2
Participants:
- Sales manager
- Condition Monitoring Technician
Turkey n=3
Participants:
- Procurement Manager
- Procurement
- Site Manager
USA n=1
Participants:
- Strategic Sourcing Manager
The 5 key insights from the desk research have been affirmed
Mining Requirement – Customer & SME Feedback
Sustainbility
Sustainability is a declared core strategic aim for most management boards, so there is internal pressure
to meet targets.
Safety
Safety is a critical focus for everyone, but even more of an operational focus due to documented events
in the last 6-12 for most of the top Mining House.
Cost Efficiency
There is a continuing drive for efficiency of spend that has raised the focus on value & potential savings in all production areas.
Uptime
Higher Uptime means Higher profits is now better accepted across mining organizations. Plus, the need to spend less on surplus assets
Suppy Reliability
Current state of very high number of suppliers and SKUS makes life very difficult for purchasers. A delay in supply has direct impact on Mine profit
5 Critical ‘fail forward’ conditions for Castrol to navigate
Larger Mining Organisations told us how their thinking has progressed fast over the last 3 years. They are far more aware of global trends and their need to be agile to capitalise/react. They are divesting of ‘dirty’ assets (coal for
They are far more aware of global trends and their need to be agile to capitalise/react. They are divesting of ‘dirty’ assets (coal for power).
Clients require more justification of supply engagement.
Clients want to reduce their external direct spend.
A rise in ‘sustainable procurement’ encompassing environmental, social, and governance (ESG) aspects for Scope 3 emissions.
Clients want suppliers to bring value, not just drop product.
Ease of working together, in long-term, global/multi-country contracts is desirable.
Other lubricant suppliers claimed to be better value and easier to work with.
Other suppliers are communicating on global deals, transparently, bringing in organisational learning.
The Castrol pathway is very unclear and appears to have little R&D in it.
Clients have more focus on greener products and a circular economy awareness (one described it as the “3Rs - Reduce, Re-use,
Recycle”).
More 'macro' thinking
- Re-positioning to global demand for commodities and decarbonisation
- Greater sensitivity to volatility e.g. commodity prices/exchange rates
- Awareness that changes in china and US have a direct or indirect impact
- Greener products and Scope 3 emissions with suppliers is now front of mind
- Larger companies are seeking stable global arrangements with major suppliers
- Like everyone we have limited resources and Castrol to be honest, play only a very small part. They don't have a massive influence over our business and the outcome
Increasingly challenged
- Sales & technical teams working well together. 'Trusted Advisor'.
- #1 with increased volume and more clients but constantly having to defend a premium pricing position
- Competitors have re-grouped post Covid-19 and are attacking on price
- Scope 3 emissions swinging into sharp focus. Shell & Total have built dedicated teams in Sustainability
- Proud of their growth & passionate but feel no autonomy nor backing.
- Implications of past decisions now impacting Castrol. Were the leader in innovation, new behind the curve
Pressures faced in current role
While sustainability is the primary pressure in discussions, safety remains the priority
Share Of Action
Safety is a critical focus for everyone, embedded in routines,
but even more of an operational focus due to documented
events in the last 6-12 for most of the top Mining House.
Related to this, the need to maximize productivity
levels/uptime.
Share Of mind
Sustainability and transition are a major element of the discussions and are clearly top of mind for the sector, albeit at different stages of development for each country.
The drive for cost efficiencies and savings is also a key
pressure, with the emphasis placed on suppliers and how they
can help with technical and wider relationship issues, not just supply.
Stages of sustainability development
Discussions around sustainability should take account of the relative stages of sustainability development
Internal and external demands
The need for sustainability is both an internal and external pressure in Australia
Internal
1 . SUSTAINABILITY
Sustainability is a declared
core strategic aim for most
management boards, so
there is internal pressure
to meet targets.
2 . COST EFFICIENCY
Sustainability is a declared
core strategic aim for most
management boards, so
there is internal pressure
to meet targets.
External
1 . SUSTAINABILITY
Impetus increasing from
customers including ESG
strategic aims into new
contract frameworks (&
government requirements).
2 . TECHNICAL PERFORMANCE
Maintaining supply and
performance, and
incremental improvements
are the core challenges.
New developments in technology
There are three broad progression stages of technological development in the sector
Digitization & Data efficiency
New technologies have got to make a difference to every day working life and be directly relevant to roles and responsibilities
Still a requirement for ‘entry level’ technology solutions, striking the right balance with needs.
Managing performance
Remote monitoring of machinery to
ensure best performance and providebearly warning of potential issues.
“New machine specifications
deliver more HP and more performance. Also, more safety
with the camera system, provides a
bird’s-eye view of the surrounding
area for better operator awareness”
Optimizing performance
Using AI and large learning models to improve performance and efficiency of products. Big data and AI used to maximise uptime and provide early warning of issues and dangers.
Using AI and large learning models to improve performance and efficiency of products. Big data and AI used to maximise uptime and provide early warning of issues and dangers.
How can Castrol help with technology and digitization?
Innovation, integration and improvement are three main areas where Castrol’s help is required in Australia
Development of new products
Proactive notification of product developments
and new specifications. Improve process of ‘selling’ new products to customers.
Integration with client systems
Simple on-line account management. “Plug-in, not reshape or reinvent”
Improve current product performance
Reviewing existing products and new formulations. Being proactive in extending uptime and improving productivity.
How can Castrol help with technology & digitization
There are three broad stages of technological development in the sector
Synergy with wider corporate footprint
Harnessing the expert knowledge from other areas of the BP global business to optimize performance and act as a partner in transitioning.
Laboratory Analysis
Providing technical support to facilitate the 2 fast testing of oil and lubricants.
Training
Provision of training on optimal product usage and maintenance best practice, in
conjunction with technical support.
How Castrol can help with sustainability
There is a clear divide between the needs in Australia and the other markets
1. PRODUCT SPECIFICS
– In Australia, sustainability assistance is required
for specific product development areas.
– Specific areas mentioned includes bio lubes, oil
and filtration for hydraulic circuits, SP150 Alpha
gear oil.
– Provide a clear roadmap of delivery
1 . GENERALIZATION
– In other markets, the needs are less mature,
with broad areas such as the need to provide
products that help with environmental and
sustainability more likely to be mentioned.
– Technical support and advice is also mentioned in this context.
– Technical support and advice is also mentioned in this context.
Castrol as a supplier
There are clear indications of improvements Castrol could make as a supplier
Communication of wider business plans
There is little knowledge of the wider Castrol business strategy and, crucially, how this can contribute to the strategic aims of clients, which is expected of a partner
Improve speed of development
Much of Castrol’s discussion of new innovations is still theoretical, when mining companies want to see practical results now, allowing time for necessary pilots & testing.
Leverage corporate footprint
Mining companies are expected to act both cohesively and globally, so they expect suppliers to do the same. With a major corporate footprint, Castrol is expected to do this as a matter of course (combined fuel and lubes pitches).
If you could get Castrol to make one improvement to benefit your business
“Innovations and evidence; Castrol are not great at providing evidence and justification for products”.
| Way of Working | New Products | Bigger Thinking/Prove ROI |
|---|---|---|
| Transparency – better support, better information, better pricing and promotion Reduce the complexity of the 2,000-line price update sheet, every 6 months. “During the tender, I mentioned that I was really confused about how to invite Castrol. I didn’t know who to contact. The available contacts were more related to retail, not B2B” | Transparency – better support, better information, better pricing and promotion Reduce the complexity of the 2,000-line price update sheet, every 6 months. “During the tender, I mentioned that I was really confused about how to invite Castrol. I didn’t know who to contact. The available contacts were more related to retail, not B2B” | Castrol to think as a strategic partner with a longer-term view than a short-term tactical transaction. e.g. to construction customers, whilst this sector is slow to keep them for everyone. Prove Castrol are worth a premium. Competitors clearly offer the same value propositionr. Castrol are taking longer to understand the differentiation and gap in market has much closed. |
| Any new variant oil requires a 2-3 years approval cycle. Must be quicker Move more quickly and speed up any process for new solutions, to fit their business as it grows and evolves. | Communicate the benefits of using bio lubes in respect of wear, moisture, heat and lifetime. So ODI extension, down time reduction, more years out of equipment. All would make a case for the higher cost of the product. | “To be more proactive with understanding how they can drive productivity in our business through extending the life of component parts. This is absolutely in their wheelhouse and their interest. But they’ve got to be competitive to be in the game” |
| Opportunity or initiatives in a strategic partnership can weigh the decision beyond that of bottom-line cost. Technical documentation and training on site | Everyone needs to make continuous improvements and think about how to upsell their value. | Castrol make the sales pitch about being more expensive but generating more value “Castrol could share or come up with their own ideas of hydrocarbon management for mobile and fixed plant equipment”. |
How could Castrol help you to achieve improvements in Technology and Digitalisation
“Manufacturing and extraction processes stay on, no downtime. Keep the cash register ringing”.
| Idea | KPI |
|---|---|
| Improve the business case for bio-degradable oils, be more knowledgeable on new synthetic performance and “replacements on fail”. | More preventative maintenance. Run machines for longer. Better understanding of ”how oil frequencies will change, how oil and filtration need to adapt; Improve oil drain intervals. Have a better idea of how service and maintenance should look”. |
| Integration with procurement systems to provide e-Catalogues, the ability to check order times and expediting. Safe ways to stop corrosion of steel or copper bearing alloys. Proactive pushing of incoming product developments & specifications, value adds – e.g. the new grease cartridges. | Performance monitoring Information instantly available to help with fast decision making. Linking technology to monitor and report things like oil changes in draglines and trucks and how well the equipment is performing, stretching maintenance intervals, etc. |
| Castrol do oil analysis, but it is one metric only. Add others, # of hours operating, load weights carried, fuel consumption. | A spread of metrics – better information to make better decisions to either save on spend or maximise return from it |
| Improvement in grease bin usage. The Castrol Grease Bin locator and inventory status system (using GPS) seems very useful. | Alerts for depleted stock and location of the next nearest supply bin with the right product in stock. |
| Reviewing existing and new products and new formulations e.g. the bio/synthetic gear oil with improved wear capability (fully synthetic with some plastic “smoothing” component). | Extended life of units and machinery from less wear, extended Oil Drain Intervals (ODI) |
| Prove better lubricants mean less equipment needs to be bought, as often | Extended machinery life, less oil being purchased |
How could Castrol help you with improvements towards your sustainability goals
“The next tender to Castrol will highlight a lot of these, for detailed answers, they need to be more forthcoming”.
| Idea | KPI |
|---|---|
| How will oil and filtration for hydraulics look for electrically driven systems? What need to change, how do they adapt? Development of ultra-low ash oil to extent DPF service life | “They are not presenting their best to us, currently. New sustainability products and new approaches present different technical problems and requirements. Esp, new equipment” |
| Extended life products, especially for dump truck oil since they use a lot of that (more than anything) and hydraulic oils. Extended service intervals, reduced volume of fluid bought (even if it is for a comparable total cost). | “Our target is a 5-10% reduction on the previous year’s spend” “We want a 15% reduction in total cost across our mines in AU” |
| Bio lubes, SP150, etc tested and available for use. | Traceability of sources, sustainability certification. |
| New gears oils, tech support, sample analysis and testing. | Extended service intervals, lower downtime, extended machine life – overall reduced costs. More profit. |
| Supply chain reliability. On time delivery, with decent tracking. Reduce inventory, cash flow, stock risk, alleviate freight/logistics issues. | Company target is 95% of items ordered are delivered in full and on time, (currently Castrol are 80-85%). Castrol must hit the 95% target before 2026 (and ideally higher, nearer to 99%) |
| “Everyone being smarter and having improved maintenance knowledge, achieving more carbon offset“ | Reduced cost, reduced oil consumption, improved environmental compliance, effective waste management. Better equipment performance with minimal environmental impact. |
| We all seem 5-10% short on people/vacancies. Having more people would mean everyone spent less time firefighting and not getting burnt out. Sustaining people as well as the environment | 1. Reduce the amount of oil they have to dispose of. 2. Re-use more oil – so that which is re-manufactured/re-refined. 3. Recycle – above 50%, ideally hitting 60%, re-used oil. |
Who leads the lubricant space in Mining ?
Who do you see as currently leading the way in lubricants for Mining?
- There are 3-4 brands in mining business at the moment. They are competing with each other. One of them is Castrol, one is Mobil, one is Shell.
- Their view is that in areas like extended drain time/ service intervals the main players including Castrol are pretty much at the same level - it is level playing field now.
- In the bulk lubricants Castrol are a good reliable brand - good quality for the price. Other players like Fuchs are developing premium products (greases, hydraulic oils), as are Total.
- Fuel supply was moved to Viva Energy (Shell branded products) for 5 years in 2023
- Shell and Pertamina are seen as leaders due to their strong distribution networks, engagement strategies, and local production capabilities in the mining sector.
- Varies by region (Argentina, Australia, Canada, Dominican Republic, Ghana, Mexico, Peru, Suriname), but notable names: Shell, Mobil, Castrol, Total. A niche supplier for speciality lubes would be Fuchs
- Does not see any of the lubricant companies as setting the world alight "they are all pretty much run of the mill". See Castrol behind his 2 other main lub suppliers - Fuchs (e.g speciality lubes) and Shell
- In SA, Total is the market leader (in terms of market share). Arveen thinks Masana are a close #2
And why do you say that – please expand...
- Castrol does the supply job well. Some companies are having supply or production issues.
- They are the leaders - the followers are local brands plus Total and Lukoil.
- Not really aware of anyone else who is doing a better job than Castrol
- Total made a big splash in Mining (they mentioned a 90-60 oil) and won a lot of business with a lower priced oil
- Want better communication and relationships/account management
- In general they use Castrol for almost all lubricants, it is a brand that meets all their needs.
- Shell's commitment to B2B partnerships, strong local presence, and comprehensive support services make it a preferred choice. Pertamina's extensive local production and government support also contribute to its leading position.
- Shell's ability to maintain high standards in both product quality and customer service positions them as a leader
- Don't have a complete picture on speciality oils since not all are supplied by Castrol
- Fuchs stands out a bit more for him as it has a AU operation with a lab and in territory blending so was less susceptible to freight issues during COVID. Recalls on job that used Shell products that were blended in Singapore exposing a massive supply chain risk - so they fell back on Fuchs because they had local blending and large storage/reserves, all within 2 hours of their HQ. Expects Castrol have overseas blending but good local tech team and a large storage facility in
- From liasing with different people, they seem to have quite a good lubrication programme
- Mobil are a good global brand for engine oil and and grease with good quality - they use a lot in in their mills
- Fuchs "are a smaller company and a lot more agile. Their engine oils are stand-out, good product that is more cost effective. They are much more customer oriented than Castrol"
- Total have the Anglo contract which equates to maybe 300 million litres of fuel and 12 to 13 million litres of lubricants