Revolving Doors for Chinas Naphthenics

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Capacity increases may see China producing nearly 40 percent of the worlds naphthenic base oils within the next two years and potentially leapfrogging from net importer last year to net exporter next, according to an industry insider.

Naphthenic production in China has grown by more than 50 percent during the past 10 years, Nynas ABs Valentina Serra-Holm told the ICIS World Base Oils & Lubricants Conference in London on Feb. 21. Capacity will increase by a further 18 percent this year, she added, noting that naphthenics now make up around 22 percent of Chinas total base oil production.

Photo: DPA Picture Alliance/Alamy

China’s rubber oils segment demands more naphthenic base oils than any other application.

Drawing on data from LubesnGreases Global Guide to Base Oil Refining, Serra-Holm pointed out that Chinas nameplate capacity for naphthenic oils topped 1.6 million metric tons per year in 2017, and that several supplier announcements in recent months indicate that the countrys nameplate capacity for naphthenics will hike up to nearly 2 million t/y in 2018.

In addition to a new stream late last year at Panjin Northern Asphalts Liaoning refinery that brought that sites capacity to around 500,000 t/y of naphthenics, Sinopec announced early this year that an expansion at its Jingmen refinery will add 100,000 tons of pale oil capacity to its slate, which currently does not include naphthenics production.

Despite the capacity increases, during 2017, domestic production was insufficient to satisfy demand, and the country relied on imports to close the gap, the marketing and technology director said. Thats because Chinas own thirst for naphthenics feedstocks is growing faster than its supply. And its demand is evolving to better-quality raw materials in several key applications, such as low-PAH (polyaromatic hydrocarbons) tire formulations and a growing electrical industry.

To date, imported material has predominantly come from Europe, where Nynas dominates as the sole large supplier, with refineries in Harburg, Germany, and Nynashamn, Sweden, that put out a combined 730,000 t/y.

New domestic production has not yet cut into imports, Serra-Holm continued. Yet by next year, Chinese suppliers will begin exporting excess supply. Currently the local naphthenics production is kept almost entirely for the domestic market, however export is likely to increase as additional capacity comes on stream.

Globally, lubricants represent the largest segment for naphthenic feedstocks, which are inexpensive-to-produce base oils with low wax content and low pour points. Naphthenics also come with poor thermal and oxidative stability and modest viscosity characteristics, so their use is extremely low in the automotive segment, mainly limited to automotive greases and shock absorber oils, Serra-Holm noted.

However, a significant portion of industrial greases, electrical oils and metalworking fluids make use of naphthenics. So-called off-spec base stocks, which are usually made at small, illicit factories, are really naphthenics only competition for certain applications, but more and more uses are requiring characteristics that off-spec oils cant provide, she continued. Niche applications are where naphthenics have a technical advantage, she said. Naphthenics are a boon to Chinas burgeoning demand for highly-refined process oils and white oils.

China certainly uses some volume of naphthenics for lubricants as well, but its primary demand for the stuff comes from the rubber industry. The rubber market in China has recorded healthy growth and is still the sector holding the best outlook for naphthenic oils, Serra-Holm continued.

According to ISA, China has emerged as the leading tire production center in the world, with 587 million tires produced in 2014, and a projected 800 million units by 2025, she said. China hasnt yet banned PAH, a hazardous component historically found in plasticizers employed in the tire-making process, but it produces only low-PAH tires for the export markets, and those formulations require naphthenic base oils.

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