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February 9, 2016

Volume 7 Issue 8

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Does China Need Better Greases?

The Chinese grease market, the world’s largest, needs to undergo a significant shift in coming years toward high-performance, high-temperature products, industry insiders and analysts say. That presents opportunity and challenge for suppliers.

The need for better-performing products that stand up more to higher temperatures stems, some say, from the central government’s Made in China 2025 policy, which is aimed at transforming the manufacturing sector from low-end, labor-intensive industry to production of more value-added products.

Photo: Yves Paternoster / SKF

Industry observers say China's grease market needs to shift toward higher-performance products.

“This strategy definitely provides great opportunities for high quality greases because to achieve such transformation, manufacturers need to purchase imported equipment, which is highly demanding on grease quality,” Jet Zhang, global sales manager at Hangzhou-based grease producer Xinya Petrochemical, told Lube Report Asia.

One of China’s major private grease producers, Xinya is known for its high-temperature greases like super-high-temperature perfluoropolyether grease and bentonite high-temperature grease, along with products such as lithium calcium grease and valve-sealing grease, both of which it considers to be specialty greases.

“Our high-temperature greases are very stable and will not burn to generate carbon deposition. They can be used in high quality imported equipment,” Zhang said, citing examples such as the German textile machinery company Monforts, now part of Hong Kong-based Fong’s Industries Group, and Brueckner, another German equipment manufacturer.

According to Xinya, it buys imported base oils, some of them synthetics, from Thailand and Singapore.

“Our focus is on high quality greases because that’s what China’s future manufacturing sector is asking for.  We don’t want to compete in the low quality market, which is already over-supplied in China,” Zhang said, adding that many low quality multi-purpose greases are produced in small mills in Shandong province, using acid treated oils containing significant levels of impurities.

This is the issue facing the grease industry in this country now: a lack of high quality domestic suppliers. High-performance, high-temperature greases that are especially needed by industries like auto manufacturing and metallurgical are dominated by foreign brands, and part of the reason is that China lacks advanced testing methods and equipment to evaluate grease performance. In the West, equipment for key tests of grease degradation, water resistance and oxidation stability are much more common.

Another major challenge is China’s slowing economy. China’s GDP growth rate hit a record low of 6.9 percent in 2015. It is possible that the true growth rate was even lower as Wang Bao’an, the head of China’s national statistics bureau that is in charge of the country’s economic data, is under investigation for graft for allegedly elevating estimates.

Will demand for grease decline? In some end-user industries, perhaps, but it will depend, said Yao Wenzhao, an analyst at Xi’an, Shaanxi province-based lube industry consulting firm Muchengyou.

“Many of my clients are in the clean energy area, such as gas power generation. The kind of generators they are using are big, expensive and imported, which need high-temperature, high quality greases,” Yao said.

“Even if GDP is not growing that fast as before, it doesn’t change the fact that the Chinese government is keen to develop the alternative energy sector,” he added.

However, grease producers working with pollution- or energy-intensive industries such as coal, or industries like steel that are dogged by overcapacity, should consider seeking clients in other industries sooner rather than later, Yao suggested.

According to China International Capital, a state-owned investment company, during the the next three years China will downsize factories in at least six industries, including steel, cement, coal, flat glass, aluminum and shipbuilding, cutting more than 3 million jobs.