Strolling around Triangle Tyres smart factory in the Chinese city of Weihai, Shandong province, it is hard to believe this is a tire factory. Sleek, highly automated machinery imported from German companies like Fischer and HF Mixing are lined up in orderly fashion, while workers are sparsely seen.
Every part of these machines is imported, including the greases inside. We have to be very careful not to damage them by using anything wrong for the maintenance because they are very expensive, a worker in the factory remarks.
This factory reflects Chinas recently published 13th five-year plan, for 2015 to 2020, which is based on one idea: turning China from a labor-intensive, polluted, little-valued-added world factory to a value-added smart and green world factory that is powered by high tech and clean energy. It also calls for massive infrastructure projects, such as the addition by 2020 of eight high-speed railways in the country, including one that links Beijing to Hong Kong.
Under this plan, it is easy to foresee that many financially capable Chinese manufacturers will, like Triangle, upgrade their facilities by adding imported, state-of-the-art machines – which in turn will stir an appetite for more sophisticated greases. Such a demand already is anticipated by Sinopec, which in late March announced it will supply highly refined grease to value-added industries including wind power generation, robotics and high-speed trains.
At a recent press meeting, Wu Baojie, vice dean of Sinopecs grease research institute in Tianjin, told reporters that the companys strength in research and development allows it to meet demand in the high value-added manufacturing industries. Sinopec will continue to enrich its product lines and expand capacity to support the development of these manufacturing sectors, reporters heard.
Demand for high quality grease is also coming from the auto industry. Despite slower growth in automobile sales in recent years, Chinese are still buying cars, especially clean vehicles as the local governments are rolling out subsidy plans. In Shanghai, for example, buying an electric car will be reimbursed up to RMB30,000 ($4,631) by the local authorities, while buying a hybrid car will get up to RMB10,000 as compensation.
In Hainan province, the local government plans to build more than 28,000 charging stations in the region by 2020 as a way to help sell 30,000 electric cars.
Global automakers are keen to take up the opportunity. Skoda will invest 2 billion euros ($2.2 billion) in China in the next five years with its local joint venture partner SAIC Motor, adding electric cars, sport utility vehicles and crossover utility vehicles to its current portfolio. Higher quality wheel-bearing greases will be sought for these cars.
While Sinopec is pursuing this opportunity, so are big privately owned grease producers like Hangzhou-based Xinya Petrochemical Co. Ltd., which is known for products like super high-temperature perfluoropolyether grease and bentonite high temperature grease, as well as specialties including damping, food-machinery and valve sealing greases.
Our high temperature greases are very stable, will not burn to generate carbon deposition. They can be used in high quality imported equipment, said Jet Zhang, Xinya global sales manager, giving examples like the German textile machinery companies Monforts and Bruckner.
Zhang dismissed the idea of competing in the low quality market. We buy synthetic or imported base oils from Thailand and Singapore to produce high quality greases because thats what Chinas future manufacturing sector is asking for. We dont want to compete in the low quality market, which is already oversupplied in China, Zhang said, adding most such low quality, multi-purpose greases are produced in small mills in Shandong province, using acid-treated oils containing lots of impurities.
China is by far the worlds largest grease producer, with an output of 926 million pounds in 2014, according to global production data gathered by the National Lubricating Grease Institute. Thats more than was made in Europe and North America combined. But international brands still dominate the Chinese market for high performance, high temperature greases, which are especially needed by industries like auto and metallurgical.
Take German specialty lube and grease producer Kluber Lubrication as an example. A subsidiary of Munich-based Freudenberg Chemical Specialties, Kluber has been in China since 1997, providing a full range of products, including lubes, greases and spray lubes, for industrial users in China.
Our wide range of products helps our clients in China to better embrace the governments 13th five-year development plan, said Freudenberg spokesman Christian Zins, pointing to the countrys wind power industry as a good example. China plans double its wind power capacity to 200 million kilowatts by 2020, building large-scale wind farms in the northwest region, including Xinjiang, Gansu and Ningxia, according to the five-year plan. Our products are used in various applications in the wind power aggregates and components, Zins said.
Kluber is well positioned for growth in China. In 2014, it invested over 150 million yuan to expand its Shanghai operation, including a sophisticated R&D center for testing and engineering, as well as customized formulations for local clients, the majority of whom are original equipment manufacturers, said Zins.
While acknowledging Chinas economy is slowing down, he expressed optimism about Klubers business in the country. Although being impacted by the overall economic slowdown, our business in China is still growing. We offer products owning the technology edge and very often having a unique market position, he said, adding that Kluber China will continue to recruit talent to innovate and grow in new industries.
Looking for new applications is crucial for grease companies, as China is eager to begin cutting back capacities in energy-intensive and polluting industries such as coal and steel. According to the state-owned investment company China International Capital, China will downsize factories in at least six industries over the next three years, including steel, cement, coal, flat glass, aluminum and shipbuilding, cutting more than 3 million jobs in the process.
Being such a small segment of the lubricants family, greases had attracted few Chinese companies into the field. But now, hit by the slow economy and further hurt by the brutal price wars in the low-end market, a number of Chinese lube and grease producers are aiming to battle for the high quality market against foreign companies.
In late March, over 40 private Chinese lube and grease suppliers formed a trade group in Beijing – the China Petroleum and Chemical Industry Federation National Oil Enterprise Alliance – with a mission to improve the overall quality of lubes and greases and promote Chinese brands in and outside China.
While we do have some producers making poor quality lubes and greases, we also have many lube and grease companies who have the talent, technology and facility to produce high quality lubes and greases that are as good as foreign companies, said Yang Shufen, director of the union. We need to help them grow and thrive in the high quality market.
She reminded that foreign companies make their products in China, too, using the same resources that the local producers are using. The only reason for these foreign companies to gain high profits is because they are foreign, and its not fair, she said.
Our entrepreneurs are very patriotic; they are not going to hand over the high-end market to foreigners, Yang added.