ILMA Compoundings January 2017 - 26

to stabilize over the past few months.
"New sales at Caterpillar hit rock bottom
around June/July 2016," Fanning indicated, "but have since started to rebound."
His company has been affected by the
decrease in sales of new equipment, he
said. Caterpillar and John Deere use Dubois Chemicals' fluids in new equipment
manufacturing, parts and remanufacturing work. The fluids are strictly used on
the industry side during manufacturing
processes; Dubois Chemicals does not
make lubricants that are used in the
finished product, such as engine oil for a
finished engine, noted Fanning.
Although sales of new equipment have
stabilized and are starting to increase,
the sales are unlikely to reach their
previous highs any time in the near
future, suggested Fanning. Despite the
slow new sales, Fanning explained that
Caterpillar's business model is aligned
to take advantage of the used market
since it has remanufacturing and usedparts sales markets. Dubois can benefit
from increases in the remanufacturing
process, so in this sense the company is
able to benefit from an increase in used
heavy-equipment in the field.
Cody Leatherman is the director of
Research and Development, Quality
Control and CLS at D-A Lubricant Co.
His company's top sellers are heavy-duty
lubricants, engine oils, hydraulic fluids,
greases and transmission fluids. Many of
D-A Lubricant's customers are in mining
and construction, so the company has
been aware of the mining slowdown for
about two years. Leatherman mentioned
that it has since leveled off and some new
operations have started, but he does not
expect the sales to be where they were
before the slowdown.
D-A Lubricant Co. sees the increase in
used heavy equipment as a new opportunity. Currently, it has a complex product
line, including lubricants for both new
and old equipment. End users and

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JANUARY 2017

| COMPOUNDINGS | ILMA.ORG

construction companies are its primary
customers, but Leatherman says he is
exploring how to reach more customers
as the base shifts. He indicated that the
base "may shift to the rental business as
the market changes." He admitted that
the original equipment manufacturers
(OEMs) will have the initial advantage
when they sell equipment to rental
companies, but as warranties expire and
more used equipment floods the market,
there might be additional opportunities.
Leatherman calls used equipment the
"bread and butter" of his company, so
he is hopeful the increase in used heavy
equipment can be a sales opportunity.
He emphasized that his company will
continue to shift thinking and sales force
as necessary.

SHORT-TERM AND
LONG-TERM IMPACTS
Chuck Leuth, co-owner at PolySi Technologies Inc., focuses on the grease market.
His company is not involved with any
oil-related products, but for greases he said
"it's a wash." He feels the heavy-equipment
glut will not have much of an impact in
the next few years for his segment of the
grease industry. The increased use of used
heavy equipment will balance out the shifting demand for grease caused by slowing
new equipment sales, he indicated.
Leuth suggested there might be impact
if the glut continues for a longer period
of time, such as five or 10 years. He also
mentioned that if an industry experiences
decreases or is eliminated in an area, this
would cause the more immediate impact
on the demand for grease.
The example Leuth referred to is the
shutdown of oil riggers out west. Multiple
news stories from the past two years echo
this theme, such as an April 2016 Wall
Street Journal blog article titled "As U.S.
Oil Rigs Shut Down, Job Pain Spreads
Across Cities." Leuth feels if something
similar were to occur again in the indus-

try, this would have the more immediate
impact on the grease market. Leuth's concern echoes the concerns of others in the
industry: the health of industries utilizing
heavy equipment and the overall health of
the economy are connected, with excess
heavy equipment being one result.

A SOFT ECONOMY
Jay Schaeffer Shields is the president of
Schaeffer Manufacturing Co., the oldest
oil and grease manufacturer in America.
His company specializes in synthetic lubricants and selling direct to maintenance
professionals. He argues that the slow
economy is really the issue, with the slowing new equipment sales and an excess of
used equipment a result. Shields said the
slow heavy-equipment sales do not cause
slow lubrication sales for Schaeffer Manufacturing as much as the general state of
the economy does. He emphasized that
it is important to look at the used-equipment glut as a symptom of the "soft
manufacturing and industry economy"
rather than a detached problem.
Shields agreed that the crash of the
mining industry has resulted in a lot of
the slowing sales, but he also reminded it
is more than just that: "Mining, yes, but
not just mining," he said. "The shutdown
of oil fields and drilling rigs due to the
price of oil falling. Also, the coal industry
price collapses due to regulations." He
also pointed to the good growing season
and falling commodity prices. All of those
variables add up to a slow economy.
Jim Carroll, the vice president of Technical Service for Schaeffer Manufacturing,
agrees; he pointed to additional issues
causing the used-equipment glut. He said
that at the same time oil prices started to
drop, demand for equipment in China
dropped. China was a big buyer of used
equipment, Carroll said. He mentioned
Caterpillar equipment specifically: "China
doesn't need all of the equipment now,
but Caterpillar's product is still there."
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