LubesnGreases recently visited two of those plants – Italmatch Chemicals facility in Arese and Temix Oleos in Caldarara di Reno – and interviewed other operators to discuss the reason behind the cluster along with trends in one of the industrys growth sectors.

Those in the industry say there is one main reason behind the number of sources in Italy making esters for lubricants: the countrys tax code. Italy taxes refined petroleum products at one of the highest rates in Europe – 0.80 per kilogram. Not being petroleum products, esters are exempt from the tax. They still cost more than mineral base oils, but the formulary benefits of esters make more financial sense in Italy than in other markets.

The pricing point for using esters in lubricants gets easier because of the tax, Norberto Gatti, Italmatchs global sales and marketing director for plastic and lube additives, phosphorus derivatives and performance products, said during an interview at the companys processing plant outside Milan. Thats the reason we have more ester producers in Italy than you will find in most countries.

Representatives of ester suppliers are quick to add, though, that esters also earn their place in the formulation of lubricants and metalworking fluids because of performance characteristics they impart.

The fact is that in Italy we have developed quite a lot of applications for esters, said Gianluca Fenaroli, CEO for Augusto Parodi Group, the Milan-based parent company of A.A. Fratelli Parodi Spa, a producer of esters and other plant-based chemicals used for lubricants and other industries. When you consider the fire-resistance, lubricity and other characteristics they provide – not to mention the growing interest renewable resources – there are good reasons to use esters.

In the Raw

Six of the seven Italian producers deal mostly or solely in natural esters. Esters are produced by combining a carboxylic acid with an alcohol, and in natural esters both components come from plants or animals. A.A. Fratelli Parodi and Carasco-based Faci Spa, both started as processors of plant oils, while Cromona-based SO.G.I.S. was founded to make use of residues from livestock slaughterhouses and non-food crops. Temixs plant outside Bologna processes oils to make chemicals such as stearic acid and uses some of the acids to make esters. Temix also purchases some fatty acids.

Italys newest ester producer, Matrica, is a joint venture between Versalis, the petrochemical subsidiary of Italian energy major Eni, and biochemical company Novamont, and was established to convert a former petrochemical refinery in Porto Torres into a refinery of non-food crops. Prochimica Novarese, which is headquartered in San Pietro Mosezzo, started as a supplier of chemicals for the textile and paper-making industries but branched into the supply of natural esters for industrial lubricants.

In addition to lubricants, all of these companies sell their natural esters for other applications, such as pharmaceuticals, plastics and coatings and for process oils used in the manufacture of materials such as rubber.

Molecular Weight

In terms of lubricants, natural esters provide excellent lubricity and high flash points, and they are non-toxic and degrade relatively fast – an obvious asset in applications where the lube may come into contact with the environment. Of course, some contend that there are also environmental benefits stemming from the fact that these fluids come from agricultural resources rather than petroleum.

But natural esters also have characteristics that are drawbacks in some lube applications. Most are relatively unstable both at high temperatures and in the presence of water. In fact, it is the ability of water to reverse the esterification reaction that helps make natural esters so biodegradable.

Some finished lubricant formulators work around these liabilities by using synthetic esters, which still have plant- or animal-based acids but alcohol that comes from elsewhere, often petrochemicals. This is the focus of Italmatch, which was founded on sulfur chemistries but which branched into esters to broaden its portfolio. The only natural esters that it produces are made at its plant in Zaragoza, Spain, which it acquired as part of its 2012 acquisition of Union Derivan.

Product Range

The natural ester suppliers are producing materials such as butyl, ethylhexyl, isotrydecyl and trimethylolpropane esters for use in applications such as fire-resistant hydraulic fluids, metalworking fluids, greases and gear oils. Italmatch, on the other hand, include polyol esters, phosphite esters and other varieties that are used either as base stocks or lubricity or antiwear additives in applications that include wind turbine lubes, two- and four-stroke engine oils and food-grade lubricants, all of which can involve high temperatures.

Analysts say demand for esters has risen faster than demand for the overall finished lubricant market in recent years and is expected to continue that way for the foreseeable future. The Italian companies agree that the climate is positive in their markets, whether their markets be Italy and neighboring European countries or countries in farther reaches.

Ester formulations are flexible because they can be made with such wide varieties of both carboxylic acids and alcohols. Suppliers say the number of combinations is practically infinite and makes it possible to customize esters to accommodate a wide range of performance needs.

Unfair Leg-Up

It should come as no surprise that companies making esters are pleased at the tax advantage their products enjoy compared to mineral oils. Others, however, including the Italian Lubricant Association (GAIL), would like to eliminate that advantage by removing the tax on for mineral base stocks.

The position of our association is we have asked the legislature several times to align our taxation system to the rest of Europe, said APGs Fenaroli, who also currently serves as president of GAIL. In our opinion, this system is in a way distorting the market.

One problem, GAIL contends, is that the tax creates a difference between prices for Italian products and those produced in other European countries. Foreign suppliers who export to Italy are supposed to pay the same tax at the border, but the situation creates a potential advantage for companies that can avoid having to pay the tax, and GAIL believes a significant minority do.

We believe that smuggled or fraudulent products account for 5 to 10 percent of the market in Italy, and that much of that comes from companies that are avoiding payment of this tax, he said. GAIL also opposes the petroleum tax because of the cost of administering it.

Fenaroli acknowledged that the association does not hold out much hope of the tax being eliminated in the foreseeable future.

Frankly speaking, Italy has a significant amount of public debt, he said. In cases like this, it is difficult for governments to give up any source of money, and for Italy now, even the tax revenue coming from lubricants is being used to pay for the debt. We [GAIL] are trying, of course to do a little bit of lobbying, but it is not so easy.

In an attempt to be practical, the association has added a fallback request to its petition: If the government will not eliminate the tax, the group asks that the requirements for it be adjusted so that the administration is less of a burden.

Branching Out

Meanwhile, Italys ester suppliers say they continue to work on technology in search of growth or better profit margins, or both. Temix is trying to branch into other ester markets by developing new varieties. Industries such as plastics, personal care and coatings consume large amounts of esters.

But we must be careful, Supply Chain Director Elisabetta Cella said during an interview. The volumes in plastics are enormous, but there is a lot of competition and the industry uses esters like commodities. Temixs solution is to develop esters that will provide some type of performance advantage – enough that users will pay specialty prices. That will require testing different chemistries and new manufacturing processes, so not long ago the company expanded its laboratory to include research and development capability.

The lab is one of the largest investments weve made here, Marketing and Sales Director Vincent Aruta said. Its important part of our strategy.

Fratelli Parodi has two main product development projects at the moment, according to Fenaroli. One is to develop a sustainable, drop-in alternative to bright stock, the heaviest grade of conventional mineral base oils. The supply-demand balance for bright stock has tightened globally due to the closing of API Group I base oil plants, which are the only facilities to make significant volumes of bright stock.

Fratelli Parodis other project is to develop metalworking quenching fluids that offer environmental and safety features while still providing superior performance.

The companies covered in the article are continuing to sink significant investment into esters, as well as their broader operations in the lubricants industry. Temix officials said their company is currently one of the five biggest ester suppliers in Europe but that it now wants to become one of the largest globally. (BASF is the largest.) In addition to the goal mentioned above to expand into new markets, officials said the company has held meetings to discuss potential acquisitions.

Temix sold roughly 25,000 metric tons of esters in 2016 and aims to reach 30,000 tons this year.

Matricas plant in Porto Torres is the markets newest source of esters for lubricants. The refinery began making esters in 2015, but the overall refinery is still under construction. Eni announced last year that it was releasing an additional 300 million for its investment in the complex, after previously spending 280 million. The refinery, meant to stimulate the economy of Italys island of Sardinia, will ultimately have capacity to make 350,000 tons per year of chemicals, mainly azelaic and pelargonic acids.

Italmatch announced late last year a deal to acquire Detrexs Elco for U.S. $45.9 million. Elco makes antioxidant, extreme pressure and corrosion inhibitor additives for metalworking fluids, greases and industrial lubes. The deal has not yet closed.