When President Donald Trumps administration released details earlier this month on another round of tariffs against China, the Independent Lubricant Manufacturers Association issued a statement warning of harm that the trade war could inflict on the lubes industry. Specifically it said the tariffs were already causing shortages in the United States of certain amines that the industry uses as corrosion inhibitors.
Conversations with industry sources, however, paints a more complex and less conclusive picture. ILMA was referring to dicyclohexylamine, an amine used in metalworking fluids. Industry sources said there have indeed been shortages of DCHA, but that they predate the tariffs and show signs now of abating. They contend that lubricant producers can turn to other sources of DCHA and even to alternative chemicals, though they acknowledge that the tariffs could yet make an impact on availability and prices.
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We have seen product become more available, and most of the tightness has gone away, said Ricardo Miyares, vice president of Shrieve Miami Chemical, a Florida-based importer of DCHA.
The U.S. and China have so far imposed two rounds of tariff increases on goods imported from each other. Among the hundreds of categories of products hit by the U.S. are lubricants and lubricant additives. After Washington announced details of its second tranche of tariffs – $16 billion of Chinese goods – ILMA issued an Aug. 9 press release advising of negative impacts on the U.S. lubes industry.
ILMA already has told the U.S. Trade Representative that China is the sole source for certain amines and corrosion inhibitors, and the trade dispute is creating shortages and cost increases, CEO Holly Alfano said.
ILMA officials later explained that it was referring primarily to DCHA, a secondary amine made through the catalytic hydrogenation of aniline with a catalyst of ruthenium and/or palladium. DCHAs primary application is as a rubber accelerator, but it can also be used in applications such as agrochemicals, textiles and flexible polyurethane foams, but also in water-miscible metalworking fluids where it helps prevent corrosion by killing bacteria and fungi.
DCHA is able to extend fluid life through its ability to control microorganisms and resist biological degradation.
The primary producers of DCHA are in China and Eastern Europe, sources said.
According to ILMA, there has been a shortage of DCHA for the past 18 months, which is the exact opposite of the markets supply between 2015 and 2016. This shortage is leading to higher product prices.
Price is being driven by decreased supply, Leiter said, explaining that some smaller U.S. factories shut down in 2016 in the face of new restrictions by the U.S. Environmental Protection Agency on manufacturing processes involving benzene – a precursor in the production of aniline. U.S. DCHA producers had long been losing money, Leiter said, so when the regulations took effect, many simply stopped making the chemical.
Industry sources agree that supply tightened in 2016 but added that the situation is now easing despite the tariffs.
Miami Chemicals Miyares said Chinese companies exporting DCHA to the United States updated their facilities to fit the latest environmental standards after initially shutting down to make those changes. Since this, tightness of supply has loosened up and prices are going down, he told Lube Report.
Tightness of supply may further decrease as new factories pop up outside of China. There has been some talk of U.S. factories that have produced DCHA in the past beginning to produce again, Miyares added.
Some industry insiders said the impact of tariffs on DCHA from China could also be avoided by choosing different suppliers or different chemicals.
I do believe there are other sources of amines and corrosion inhibitors around the world, so I dont necessarily agree with the ILMA statement. I believe there are alternatives, said an industry player who asked to remain anonymous.
Industry sources and ILMA agreed that DCHA pricing could still rise again. China is a major supplier of aniline, the main ingredient in DCHA, and aniline costs are rising, according to ILMA. Those increases seem likely to affect DCHA prices, since there is no replacement for aniline. Im not aware of any factory in China that doesnt use anilines [when producing DCHA], echoed Miyares.
Since CHA and DCHA are direct downstream products of aniline, their market price is based mainly on the price of aniline, a Miami Chemical report noted.
The U.S. Trade Representative will soon announce a process by which individuals may request the exclusion of particular products covered by a tariff line subject to the additional duties.
The lubricants industry primarily uses corrosion inhibitors in metalworking fluids, hydraulic fluids, greases and gear oils, though smaller volumes are also used in engine oils, turbine oils and general industrial oils. Amine-type corrosion inhibitors make up roughly 40 percent of corrosion inhibitors, according to consultancy Kline & Co.
There are three general categories of amines: primary amines, which are commodities; and secondary and tertiary amines. Primary amines include, but are not limited to, monoethanolamine, isopropanolamine, diglycolamine and diethanolamine.
The primary amine makes up about half of amine demand, said David Tsui, program manager at Kline. A large portion of these products are sources from China.