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January 10, 2020

Volume 7 Issue 4

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Handi Mulls Hong Kong IPO

Hainan Handi Sunshine Petrochemical Co. is in talks to prepare an initial public stock offering on the Hong Kong Stock Exchange, aiming to raise funds to develop a finished lubricant business, according to a senior manager at the company.

Handi has also started construction on the first stage of a long-delayed expansion of its API Group II base oil plant in Hainan, China.

“We are consulting with different sides and are in talks with the Hong Kong Exchange, hoping to get an IPO in Hong Kong as soon as possible,” Base Oil Sales Manager Xin Llingbo told Lube Report. The possibility of a stock offering was first reported by a local news site.

Handi started preparing for an offering in September, but it has not yet submitted a prospectus. In its statement, the company said demand for base oils is dropping in China and in Asia so it wants to branch into the lucrative high quality lubes segment. Handi claims to be the fourth-largest refiner in China. Proceeds from the Hong Kong stock exchange offering would be used to develop the lube business.

Zibo, Shandong province-based consulting company Sci99 forecasts that 2020 will bring a more intense price war among Group II base oil suppliers due to low demand and an oversupplied market.

Handi’s ultimate plan is to build a new facility with capacity to make 1.5 million t/y of Group II+ and Group III base oils, but it was reluctant to undertake such a large project given the weakness of the market. Now, the much delayed project is finally progressing. The construction in Hainan started recently; however, the project will be divided into two stages, Xin said.

“The first stage of the facility, which now is under construction, will be 800,000 t/y capacity. The facility should be completed by the end of 2020,” he said. The timing for the remaining 700,000 t/y facility depends entirely on market demand, he added.

“We believe the economy will bounce back eventually, but we don’t know when. So we have to proceed on the expansion project with caution,” Xin said.

In September last year, Handi also announced that it planned to invest about ¥676 million ($97.3 million) to build a 300,000 t/y  rerefinery in Hainan that will use waste lubricants as feed stock.

Originally the company expected to complete that facility by the end of 2020, but chose to delay it. Xin said construction will not start until completion of the first stage of the project.