Chemtool Bets on Giant Grease Plant

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Chemtool Inc. is within two months of opening a grease plant in Tehachapi, Calif., with capacity to produce up to 75 million pounds per year,making it by far the largest grease plant in the western United States, the company announced last week.

Chemtool officials acknowledged that the project might surprise some, given the doldrums in which the U.S. grease industry has been mired. But they said that the markets consolidation fits into their strategy, which is to fill thevoid left by the large number of western grease plants that have closed in recent years.

Were gambling, General Manager Dean Athans told Lube Report yesterday. The grease market is definitely shrinking. But so many grease plants in the west have shut down that we think we can offer savings on transportation costs if we have a presence there – especially with a large plant like this one thats capable of bulk volumes.

The new plant is a 50,000-square-foot addition to a lubricant blending and packaging plant that Chemtool built in 1998. The existing plant makes a small amount of grease – as well as gear lubricants, metalworking fluids and cleaners – but not from so basic a level as the new plant.

Bills for the addition are still being tallied, but Athans said it will end up costing between $5 million and $10 million including infrastructure improvements such as a double 2,600-foot rail spur. Production equipment includes 10 reactors ranging from 20,000 to 50,000 pounds; a Stratco contactor; indoor storage of bulk raw materials and finished goods and a 6-million Btu hot oil thermal system. Athans added that the new plant was designed to allow expansion of manufacturing and storage capacity.

This is by far the biggest grease plant in the West, he said. Nothing else is even close to meeting its capabilities.

Grease demand in the United States has been flat for years. According to the 2001 Lubricating Oil and Wax Sales report from the National Petrochemical and Refiners Association, annual demand ranged from 383 million pounds to 353 million pounds between 1994 and 2001. The market is widely viewed as having significant overcapacity for production.

Still, Chemtool, based in Crystal Lake, Ill., sees opportunity in the fact that the West Coast has lost approximately 10 grease plants over the past decade, including several that were operated by big oil companies. Athans argued that the Tehachapi plant, located 110 miles northeast of Los Angeles, will give Chemtool transportation cost advantages over product that is now being brought in from outside the region.

We think theres a real opportunity in bulk deliveries, he said. If youre shipping liquids, rail cars are pretty easy. Those tankers can be cleaned out and then used for something else. But with grease you cant do that so theres no return delivery and you just get killed on cost.

Chemtool, which also manufactures grease in Crystal Lake, believes it willgain another advantage from the number and size of reactors in the new plant.

Theres so much specialization of products now that its much more efficient to make large batches so you dont have to make so many changeovers, he said.

Chemtool said it expects the new plant to serve the western United States and Canada, as well as Mexico and export marketsin the Asia-Pacific region.

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