Parent firm Luan Group – also based in the coal-rich Shanxi province – has capacity to produce 400,000 tons of liquefied coal-based olefins per year. Luan will also start operation of a 1.8 million t/y CTL-based fuels and other products facility by September using Chevron Phillips Chemical Co.s catalyst technology and the Fischer-Tropsch process.

Taihang only makes low-viscosity lubricants, said Liu Junyi, Taihangs executive director. We target lightweight engines and gearboxes, Liu told Lube Report Asia. Its clear that vehicles with lower emissions will be the mainstream in the near future.

If demand is good, Taihang will expand its lubricant capacity all the way up to 350,000 tons a year, Liu added. Internal supply obviously helps lower the cost, Liu said. And our base oil supply will be sufficient.

Liu has reason to believe in the future. Right now, synthetics are not very much preferred by Chinas price-conscious consumers, explained Wu Yuedi, founder of Shanghai-based Naco Synthetics, with whom Luan has a joint venture in Shanxi province that makes 15,000 t/y of high-viscosity PAOs, including PAO150 and PAO200.

Its true that synthetics are priced slightly higher than mineral oils, but such a disadvantage can be offset by the benefits of synthetics, Wu said. He took diesel engine oils as an example. While conventional lubes are about 500/t (approximately U.S. $80/t) cheaper than synthetics, they cannot match the performance of synthetics, which may get up to around 30,000 kilometers before an oil change is needed, while lowering emissions and increasing fuel efficiency, Wu said.

Both Wu and Liu agreed synthetic lubricants are the future. China will continue to tighten environmental laws and closely follow the European Unions emission standards, which offers a great opportunity for synthetics, Liu said.

China will require all light vehicles to adhere to China VI emission standards by mid-2020, Liu continued. Conventional oils wont be able to catch up with the speed of the release and implementation, but compliance wont be a problem with synthetics.

Liu is confident about Tiahang lubes quality, boasting that it is equal to, if not better than, the same grade of synthetics supplied by multinationals.

He points to a deal commenced in May as evidence. Tiahang signed a supply agreement with Zhengzhou Research Institute of Mechanical Engineering, which develops gearboxes used in high-speed trains and subway trains in China.

Right now, the institute is using multinational suppliers like ExxonMobil for gearbox oils, but the cost is too high, so we are going to replace them, Liu said, noting that the institute is currently testing Taihang synthetics. Aside from gearboxes for trains, the two parties will also work together on gearboxes for drones.

Taihangs ambition, backed by Luans ample supply of olefins, extends beyond Chinas borders. Taihang also partners with the Chinese Academy of Sciences Innovation Cooperation Center in Bangkok.

Under Chinas Belt and Road Initiative, the state-run think tank works with Chinese companies in different industries to export machinery and technologies to Thailand. There is a similar center in Africa, which Taihang also plans to get involved with.

Our lubes will be exported to different countries, pre-filled in machines and trains, Liu added. But we will also work with the CAS center to improve lube standards in targeted countries.

Taihang plans to open an office in Europe as well, but for a very different reason. European companies have good technologies and high-quality products, which we want to bring into China, Liu said.