Chinese lubricant manufacturer Luroda recently acquired GS Caltex’s 65% share in their joint venture blending plant in Tianjin, China, becoming the sole owner of the facility and gaining flexibility to produce products for both the South Korean company and other customers.
GS Caltex set up the joint venture with Wuxi-based Luroda to produce Kixx branded lubes for the Chinese market. The facility will continue to churn out Kixx products, a Luroda official told Lube Report at the Mu Cheng You salon event held Aug. 18 in Xi’an, China.
The deal cost Luroda about ¥120 million ($16.4million).
Luroda CEO Di Weiyi said his company pursued the deal for two reasons. One is that Luroda runs a big original equipment manufacturer business and wanted to use the Tianjin plant to produce lubes for other clients.
“It helps us expand the OEM business at a time when cutting costs is a focus for more lube brands,” Di said. He added that cost efficiency is a core competitiveness for Luroda.
“Our long-term partnership with GS and Formosa [Petrochemical, of Taiwan] allows us to get high quality base oils with the best price,” he said.
The company is in talks with two potential foreign clients about making products at the Tianjin facility, Di said.
Luroda now has three wholly owned production sites in China with combined capacity of 800,000 metric tons per year. The other two are located in Wuxi, in Eastern China’s Jiangsu province, and the southern industrial center of Guangzhou.
The other motivation for Luroda is the increasingly fierce competition in China’s lubricant industry, which is causing consolidation among blenders.
“It’s difficult for the smaller blenders with little risk hedging resources to survive,” Di said.
Luroda said it knows the importance to diversify risks, which is why it also has developed its own lube brand Luroda, as well as made itself an exclusive distributor in China of Kixx and Polo, the latter a lubricant brand owned by United States-based AOCUSA. While Luroda targets car owners in smaller cities, Kixx and Polo are marketed in big cities.
As China currently does not offer tax rebate for lube export business, few blenders are actively looking for opportunities to sell abroad. Luroda is no exception, but it tried to sell API SP grade lubes in bulk to Canada and Southeast Asian countries. Clients there usually re-package the lubes and sell under their own brands. “We have the capacity, and we’d like to do more exports, but currently we are only interested in big orders,” Di said.