Yitai Bochen Chemical Technology Co. began construction this month on a new API Group III base oil plant in Zibo, Shandong province, marking a major boost to China’s domestic supply of high-grade lubricant base stocks. The project is intended to enhance national self-sufficiency and reinforce the security and stability of the country’s lubrication industry supply chain.
The investment comes as China increases production of higher-quality base oils in response to growing demand from automotive, industrial and specialty lubricant sectors. Group III base oils, valued for their high-performance and low-volatility characteristics, remain in relatively short supply domestically and producers are expanding synthetic and advanced-processing capacity.
Project specifications released by the company indicate the plant will use Fischer-Tropsch synthesis products and industrial white oil as feedstock. Designed output includes 250,000 metric tons per year of Group III base oil and food-grade white oil. The facility carries a total investment of ¥766 million ($107.8 million) and is projected to generate about ¥2 billion in annual revenue once operational.
This is a challenging time for Group III producers in China. As the government introduced more stringent lubricants specifications, which require Group III, imported base oil has been replaced by homegrown material, explained Eugene Tan, managing director of Emvolution, a supply chain and business growth consultancy focused on Asia.
Companies that were quick to anticipate growing demand now find themselves with underutilized capacity. Permits to export are being issued but not enough to mitigate the problem.
“Directionally China is now long both base oil generation and lubricant blending capacity with significant underutilization,” Tan told Lube Report. “What we are seeing now is surplus Group III capacity.”