KH Neochem Approves Expansion

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KH Neochem Approves Expansion
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The board of directors of Japan’s KH Neochem Co. decided on Dec. 27 to invest ¥9.5 billion (U.S. $82.5 million) at its manufacturing plant in Ichihara City, Chiba Prefecture, to increase its capacity to make raw materials for refrigeration lubricants.

The company cited growing demand from emerging countries and the shift to more environmentally friendly refrigerants.

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Construction of the capital project is planned to start in June 2022, with completion expected in July 2024 and production to begin in August 2024.

Refrigeration lubricants are used to circulate refrigerants inside air-conditioners, and raw materials for such lubricants represent a major product in the company’s performance materials business.

KH Neochem specializes in hydroformylation, or oxo reactions, that produce alcohols and esters along with such derivatives as 2-ethylhexanoic acid and isononanoic acid, which it sells as raw materials for lubricants. It also makes fatty acids, esters and feedstocks for niche lubricants used in refrigeration compressors.

“Recently, there has been growing demand for KH Neochem’s refrigeration lubricant raw materials due to the expansion of the air-conditioner market, such as in emerging countries, and the shift to environmentally friendly refrigerants to protect the ozone layer and prevent global warming,” the company said in its notice. “With the tightening of international environmental regulations, demand for environmentally friendly refrigeration lubricants is expected to grow further in the future.”

KH Neochem said in its third quarter 2021 earnings report that its performance materials segment – which includes refrigeration lubricant raw materials – reported operating income jumped 97% to ¥7.1 billion, improving from ¥3.6 billion in the same quarter last year. Air-conditioner sales remained firm throughout the third quarter, despite the peak demand period from July coming to an end as usual, KH Neochem said in its third-quarter earnings presentation. Global air-conditioner sales for 2021 are expected to return to 2019 levels, as Japan’s economy recovers from the COVID-19 pandemic, the company said.