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Coronavirus Halts Operations

The Covid-19 outbreak is proving to be the most disruptive event for the base oils and refining industry since the Great Recession of 2008, causing refiners to cut back on production or temporarily shutter operations altogether. 

As workers stay home and travel has ground to a halt, the sudden drop in gasoline and fuel demand is wreaking havoc on crude oil refinery operations, with some runs being cut by 30 to 40 percent, a U.S. refiner said. Downstream consumption of petrochemicals such as base oil is declining, as well, and many companies are running out of storage. 

Ergon’s naphthenic refinery in Vicksburg, Mississippi, which began a planned turnaround on March 5 that was originally scheduled to last 26 days, has delayed its restart.

Factory shutdowns have been particularly evident within the automotive industry. Suppliers acknowledge that every segment of the business has been affected, with cascading effects forcing auto makers, tire manufacturers and associated businesses to suspend operations. Tire and rubber manufacturers are major downstream users of process oils.

On the other hand, several refineries continue to run at normal rates, or plan to increase operating rates to meet growing demand for certain products. San Joaquin Refining in Bakersfield, California, hoped to avoid a reduction in run rates because of unusually high demand for asphalt. 

Finished lubricant manufacturers in the U.S. and elsewhere are permitted to continue production to support essential business, such as trucking and agriculture. 

Activities are picking up in areas where the virus seems to have largely run its course. Valvoline announced in late March that it had largely ended work-from-home protocols at its China offices. The company has also resumed construction of a $70 million lubricants plant in Zhangjiang, China, after the virus forced it to suspend the project in February. 

India’s BS VI Takes Effect

India took a large step toward reducing its very high levels of air pollution last month with the implementation of its Bharat Stage VI automobile emissions standards.

The move marks an unprecedented leap, bringing one of the world’s largest developing nations roughly on par with European Union emissions regulations. It also significantly raises the quality of lubricants that will be required in new cars, trucks and motorcycles. B.S. VI is equivalent to Euro VI, which the EU implemented in 2015 and 2016.

The Indian government’s new regulation prohibits the sale or registration of new vehicles that do not meet B.S. VI after April 1. Automakers won a small reprieve when the nation’s Supreme Court gave them until later in the month to sell models compliant with B.S. IV, as sales had decreased dramatically because of the Covid-19 pandemic.

Vehicle prices in India are expected to rise significantly because of the costs of emissions control technologies. Costs for engine oils are also expected to increase as lubricants must be reformulated to accommodate those technologies.

PdVSA Lube Chief Arrested

Oscar Rafael Aponte Landaeta, president of Petroleos de Venezuela S.A.’s lubricant business Venezolana de Aceites y Solventes Vassa, was one of several company officials arrested in March on corruption allegations by a committee appointed to reform the national oil company.

The public prosecutor’s office arrested Landaeta based on allegations of smuggling Vassa products, receiving commissions on overpriced transit contracts and irregular use of company facilities for personal benefit. The executive allegedly diverted strategic material such as lubricants, greases and sulfonic acid from Vassa by manipulating the company’s computer systems and hiding irregularities in the dispatch of those products.

According to local political risk and oil consultant Jose Chalhoub, the shakeup likely will not lead to anything positive for the country’s lube market, which has struggled with severe shortages for more than a year as the domestic economy crumbles.

“Not much of the lubricants and motor oil in Venezuela is coming from PdVSA, and most of it is being imported from the United States, some coming from Shell,” said Chalhoub.

DuBois to Acquire Cimcool

Hillenbrand Inc. will sell its Cimcool metalworking fluids business to DuBois Chemicals Inc. for $224 million in cash. 

DuBois also agreed to pay up to $26 million in contingent purchase price upon a future possible sale of the combined DuBois and Cimcool businesses, conditioned upon DuBois’ ultimate sponsor receiving elevated levels of return on equity, for an aggregate purchase price not to exceed $250 million.

The sale follows Hillenbrand’s strategic review of alternatives for Cimcool, which was part of a 2019 purchase of Milacron Holdings Corp. Hillenbrand completed the acquisition last November in a cash and stock transaction valued at approximately $1.9 billion, including repayment of Milacron’s outstanding debt. Cimcool is the fluids technologies unit of Cincinnati, Ohio-based Milacron. 

DuBois’ metalworking fluids lines include cutting fluids, drawing compounds, extrusion oils, machine cleaners, stamping compounds, tube mill coolants and vanishing liquids.

Cimcool’s products include precision metal removal fluids, rust preventatives, metal forming fluids, specialty fluids for heating and air conditioning systems, maintenance cleaners and specialty fluids.

Hillenbrand stated closing of the transaction was expected on March 20. Employee consultations required by law may result in a second transaction closing for the Dutch portion of the Cimcool business. If required, Milacron has agreed to operate the Dutch business for DuBois until closing.

Nynas Reorganization Extension Approved

A Swedish court approved an extension to Nynas AB’s re­organization, giving the company additio­nal time to stabilize its operations on the path the company believes will lead it back to profitability.

Nynas, one of the world’s largest suppliers of naphthenic base stocks, filed for reorganization in Swedish court on Dec. 13. The company filed for an extension to the process shortly before it was originally set to end on March 13, and will now have until June 15 to complete the reorganization.

Nynas, a joint venture between Venezuelan national oil company PdVSA and Finnish refiner Neste, said United States sanctions against it also cover entities controlled at least 50 percent by PdVSA. The Venezuelan company owns 50.001 percent of Nynas.

The company said its stakeholders approved a potential change in ownership structure, which the United States Office of Foreign Asset Control has confirmed would exempt Nynas from sanctions.

Nynas has not released details on what the ownership change would entail, but any alterations would most likely leave PdVSA with less stake in the company than it currently owns. 

Nynas said its next step in the reorganization process will be to secure financing to continue its operations, including purchases of crude oil. 

Nynas operates two naphthenic base oil plants in Europe: a 400,000 metric tons per year facility in Nynashamn, Sweden, and a 330,000 t/y plant in Harburg, Germany.

Stock Exchange Hears Tianhe Appeal

Tianhe Chemicals Group appealed its delisting before a Hong Kong Stock Exchange disciplinary board after a prolonged suspension for failing to meet exchange requirements. The Jinzhou-based company was delisted in January after five years of inactivity. 

The lubricant additives and specialty fluorochemicals producer has been suspended since March 2015, shortly after its 2014 initial public offering. Trading of Tianhe’s stock was suspended for failure to file audited financial reports, a lapse stemming from an auditor’s refusal to sign off on its 2014 annual report. The auditor concluded that the company did not adequately answer questions of whether some activities were properly accounted for and whether it had adequate internal controls to ensure compliance with the Hong Kong exchange’s rules.

The stock exchange later said that Tianhe must address its concerns before trading of its stock could resume. Tianhe has said that it was attempting to do so, but trading was never allowed to resume.

Tianhe can appeal an adverse decision by the review committee to the Listing Appeals Committee, the final appeals body. If it is eventually delisted, under Hong Kong Stock Exchange rules the company can restart the application process immediately.

Briefly Noted

Shell Indonesia will double production capacity at its lubricant blending plant in Marunda Centre, north of Jakarta, to 300 million liters per year.

Idemitsu Kosan Co. will sell wholly owned subsidiary Shell Lubricants Japan back to Shell as it looks for more overseas opportunities amid a shrinking domestic market.

Morris Lubricants invested $1.8 million in its production and reception facilities at its Shrewsbury, England, headquarters. The investment includes new storage tanks and a bulk filling line.

Lockhart Chemical and Sea-Land Chemical expanded their distribution agreement, allowing Sea-Land to distribute to Illinois, Indiana, Iowa, Minnesota, Missouri and Wisconsin starting May 1.

Faces in the News

HollyFrontier announced that former Calumet CEO Tim Go will be its new executive vice president and chief operating officer effective in July. Calumet board member Steve Mawer has taken Go’s place.

Alison Fisher has been named general manager of Lubrizol UK’s national headquarters in Derbyshire. She succeeds Simon Griffiths.  

Sea-Land Chemical Co. promoted Matthew Mapus to vice president of marketing. Mapus previously served as the company’s director of marketing.

Anderol Specialty Lubricants appointed Maurice Sonntag as global sales manager. 

Curt Ellison joined Palmer Holland as a lubricants account manager serving clients in several U.S. Midwestern states.

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