As the tariff war between China and the United States continues to escalate, the lubricant industry is facing challenges such as supply chain fluctuations and rising costs, but at the same time ushering in the strategic opportunities of domestic substitution and high-endization. This article analyzes base oils, additives, and specialty fats and oils to provide market insights and action guidelines for lubricant manufacturers, traders, and users.

A tariff war continues to escalate, the lubrication industry needs to turn crisis into opportunity

China-US trade has been disrupted by the US since Trump's first term opened a tariff war with China in 2018. After the start of Trump's second term, a new round of tariff war was opened on February 4, with the U.S. imposing a 10% tariff on Chinese imports; as of April 9, U.S. tariffs on China soared to 145%. In the face of U.S. tariff bullying, China struck back with a heavy fist, and from April 4 onwards, the U.S. counter tariffs were simultaneously accumulated to 125%, and declared that at the current tariff level, there is no longer a market for U.S. exports to China, and that subsequent additional tariffs by the U.S. side will be ignored by China. Against the backdrop of the U.S. utilizing tariffs to exert extreme pressure, China has firmly defended its legitimate rights and interests and taken reciprocal measures to counterattack. As long as the U.S. does not stop fighting tariff wars and trade wars, it is impossible for China-U.S. trade to return to normal. China is a beneficiary and defender of globalization and free trade, and the US-China tariff war has prompted China to strengthen ties with other trading partners and reconstruct a de-Americanized trade network. The tariff war will also accelerate the process of forcing domestic substitution to ensure supply chain security. As a lubrication industry practitioners, we must have a clear perception of the general trend, have a clear judgment on the trend of the lubricant market, effectively deal with the short-term impact, the long-term layout should be in line with the market requirements, give full consideration to the security of the supply chain, and increase investment in research and development to realize the domestic substitution and the core technology independently controllable.

II Impact of the tariff war on the lubricants market

The tariff war is now mainly affecting the bilateral trade between China and the United States. The U.S. lubricant market is a mature market, for a long time, few Chinese lubricant brands and products into the U.S. market. Therefore, we mainly analyze the impact of tariff war on China's lubricant market. Lubricating grease is composed of base oil and additives. Base oils include I / II / III mineral oil (some manufacturers will be III oil components of the oil is defined as synthetic oil), IV PAO, V PAG, alkyl naphthalene, silicone oil, fluorine oil, etc.; a wide range of additives, both a variety of composite additives, but also anti-oxidant, anti-wear, extreme pressure, cleaning, dispersion, viscosity, rust, anti-foam and other roles in the role of a single agent, as well as the surface of the metal processing fluids to live, There are also additives for metal working fluid such as surface activation, emulsification, slow release, sterilization and so on. The categories of lubricating oil and grease are diverse, divided into broad categories, including a variety of internal combustion engine oil (gasoline engine oil, diesel engine oil, railroad locomotive oil, marine oil, gas engine oil, etc.), hydraulic oil, gear oil, compressor refrigeration vacuum pump oil, turbine oil, grease, as well as a variety of functional oils and special greases. The current pattern of China's lubricant market is that there is an overall oversupply and outstanding structural contradictions. The capacity of general-purpose, low-end and medium-end products is huge and the competition is fierce; the market of synthetic, high-end, special products and green and low-carbon products is mainly in the hands of U.S., European and Japanese manufacturers.

01 Raw material analysis

Base Oil Supply Analysis
Class I/II base oils
The supply of such base oils is mainly affected by the cost of crude oil and demand, and the market is currently well supplied, especially for medium and low viscosity base oils, with imported sources such as Singapore, South Korea, Formosa Plastics and domestically produced sources competing in the same arena, and facing a surplus situation on the whole.
Class III base oils
Class III base oil production capacity accounts for about 13% of the global base oil production capacity, mainly from South Korea, Singapore, the Middle East and other places, a small amount of domestic Maoming Petrochemical production capacity is mainly for Sinopec to use, with the gradual commissioning of domestic production capacity, it is expected that domestic Class III oil will have a greater room for improvement. With the domestic production capacity gradually put into production, it is expected that domestic Type III oil will have greater room for improvement. Compared with Type II oil, the price of Type III oil is relatively firm.
Class III+ base oils
III+ base oils are not a formal classification, the viscosity index of III+ base oils is generally higher than that of Class III base oils, and the industry also classifies gas oils such as Shell GTL as this category. III+ sources are concentrated in the Middle East. This type of base oil has been regarded as high-end oils by the industry, which can partially replace IV/V synthetic base oils, and is mainly used in high-level automotive engine oils and high-end industrial oil blending, cosmetics, thermal management fluids, etc. Due to the recent price increase of synthetic base oils, it is not easy to find synthetic base oils in the market. Due to the recent price increase of synthetic base oils, it remains to be seen how the spillover effect on the III+ base oil market will be.
Class IV base oils
Class IV base oil polyalphaolefin PAO is the most representative and widely used synthetic base oil with the highest technological threshold, with a global production capacity of over 800,000 tons/year. Two U.S. companies, ExxonMobil, Chevron Phillips and London-based INEOS Group, are the dominant forces in the PAO market, with more than 80% of the global market share. LANXESS acquired Copolymer and owns Copolymer's medium and high viscosity PAO capacity in Canada, and Japan's Idemitsu also has PAO output.
ExxonMobil is the world's largest supplier of PAO, with four Group IV and Group V base oil production sites in the U.S. and France. ExxonMobil's annual global production capacity for low-viscosity PAO is more than 200,000 tons, for high-viscosity PAO is 100,000 tons, and for synthetic esters and alkylated naphthalenes is about 70,000 tons. Low viscosity PAO capacity from Europe is more than 100,000 tons. Chevron Phillip's PAO plants are located in Texas, U.S.A. and Belgium, Europe, of which the Belgian plant mainly produces low-viscosity PAO.

(Photo: INEOS PAO production site)

The same production facilities are located in the United States and Europe, with the plant in Belgium producing low-viscosity PAOs and the United States producing medium- and high-viscosity PAOs and distributing them to the global market.

China is the second largest PAO consumer market besides the U.S., and the supply channel mainly comes from the three leading brands mentioned above. In recent years, the demand for PAO in the high-end lubrication market has grown strongly, and domestic manufacturers have invested in the R&D and production of PAO. Sinopec Maoming has formed 12,000 tons / year of low-viscosity PAO production capacity, is in production of high-viscosity PAO, PetroChina, Dowpol Chemical, Yapeiene and other manufacturers, the progress of mass production varies.

Whether it is LAO raw material capacity, PAO synthetic base oil supply, or in the end application areas, the main U.S. and European manufacturers currently have a dominant position. As the production facilities of the leading manufacturers in the United States and Europe have a layout, low-viscosity PAO Europe and the United States mainland have production, the European region of Belgium, France and other countries PAO plant production capacity is also large, it is generally believed that the low-viscosity PAO from Europe by the tariff war is relatively small, but there will be fluctuations in the price; high-viscosity PAO raw materials and finished products originating in the U.S., the impact of tariffs will be the largest, the impact of tariffs. At present, the market shortage is serious. Lanxess Canada and Japan out of the light of the capacity to supply the Chinese market is limited, long delivery period, the recent offer is also jumping up.

High-end synthetic lubricants with PAO base oil as the main raw material are mainly used in military, offshore, aviation, heavy machinery, high-grade fuel vehicles, electric vehicles, wind power, high-speed rail, robotics, data center thermal management and other high-end fields.

Due to the high viscosity PAO by the tax increase the biggest impact, fan speed gearbox oil and other high viscosity PAO synthetic lubricants in the short term to face the supply shock, the market supply is difficult to find. Linkage effect driven by low-viscosity PAO also appeared to disturb, recently traders offer rose 10-20%, later also faced a shortage situation. This is also a group of international brands, especially in the high-end market share of the international brands, the recent price adjustment communication letter and the main reason for the price increase notice.

PAO market's short-term impact and structural predicament, for Sinopec, Yapeiene and other localization of faster progress of manufacturers to provide an excellent opportunity for domestic substitution. Such manufacturers comprehensive layout of low, medium and high viscosity PAO market, the formation of the initial supply capacity, and there can be a rapid landing of the expansion plan. It can be expected that, in recent years, mastered the core technology of PAO domestic brands will accelerate the localization of PAO investment and capacity expansion, a comprehensive attack on the low, medium and high viscosity PAO market. The future supply of PAO in the Chinese market will be dominated by imported brands to domestic products to fully replace. And “Made in China” in other areas of the evolution of the same path, cost-effective Chinese PAO in the capture of the domestic market at the same time, but also with the U.S. and European brands in the global market competition.

Group V Base Stocks - Group V base stocks include synthetic base stocks other than PAO
alkylated naphthalene

Alkylated naphthalenes are a range of naphthalene alkylated, high-performance Group V synthetic base stocks that are used in high-end engine oils, industrial oils and grease formulations to enhance the performance of synthetic and mineral lubricants for automotive and industrial applications.

The main suppliers of alkylated naphthalene include ExxonMobil Chemical and King's Industries, both of which are American companies. Small quantities are available from individual manufacturers in China.

The current tariff war has essentially eliminated the sale of U.S.-sourced alkylated naphthalenes in China's lubricant market. Automotive and industrial grease formulators have the flexibility to use synthetic esters in place of alkylated naphthalene formulations, so the alkylated naphthalene tax increase will have little impact on the domestic lubricant market.

synthetic ester

Synthetic esters are a class of synthetic base oils made through esterification reaction, and are classified as Class V oils in the classification of base oils. Synthetic esters can be subdivided into monoesters, diesters, diphenyl esters, polyol esters, polyesters and other varieties, which are widely used in the formulations of high-grade engine oils, aviation oils, industrial oils, refrigeration oils, greases, metal working fluids and other products.

The supply channels of synthetic esters are diversified, with well-known manufacturers including ExxonMobil Chemical, BASF, Cargill (acquisition of WoTech UK), LANXESS (acquisition of Copolymer), Nico, and Imori Oleochemicals, etc., and their production facilities are located in the United States, Europe, Southeast Asia, and other places. Especially in Southeast Asia, Malaysia and Indonesia are rich in vegetable oil and oleic acid resources, and many famous brands have set up factories or OEM production of synthetic esters here.

Domestic synthetic ester manufacturers, including Sinopec, Weir Pharmaceuticals, etc., around the synthetic ester projects are also reported from time to time put into operation listed.

Due to the many imported and domestic sources, the current domestic supply of synthetic esters is more substitutable. The tax increase will have the greatest impact on U.S.-made synthetic esters such as ExxonMobil, and some automotive and industrial grease formulations that specify the use of U.S. brands are likely to be more affected by the tariffs.

PAG

PAG is one of the synthetic base oils of class V. It is a collective term for homopolymers or copolymers of ethylene oxide, propylene oxide, and butylene oxide, commonly known in the marketplace as polyethers.

PAG is a relatively unique synthetic base oil with high oxygen content, strong cleaning properties, according to the structure is divided into water-insoluble, water-soluble and oil-soluble polyether, widely used in industrial gear oils, hydraulic oils, turbine oils, compressor oils, refrigeration oils, event oils, transmission oils and grease formulations.

The major manufacturers of PAG include Dow Chemical, Clariant, BASF and Sasol. The production facilities of these manufacturers are located in Europe, South Africa and the United States, etc., and they also have localized production capacity in China, so the impact on the domestic lubricant market after the tax increase is not significant. However, individual varieties produced only in the United States, such as Dow OSP oil-soluble polyether supply will be affected. Dow OSP is mainly used in some of the high-end engine oil and transmission oil formulations, there are also lubricant manufacturers will be used as anti-wear, clean and anti-water components in high-end industrial oils.

fluids

Silicone oil is the trade name of liquid linear polyorganosiloxane with repeating silicone-oxygen bond Si-O as the main chain in the molecular structure and connecting organic group on the silicone atom. It is a synthetic base oil and lubricant with a wide range of promising applications and is used as electric insulating oil, shock absorbing and damping oil, hydraulic transmission oil, vacuum diffusion pump oil, heat transfer oil, textile oiling agent, mold releasing agent, and all kinds of silicone grease.

Silicone oil head manufacturers including Germany's Wacker Chemistry, the United States Dow Corning (now Tao Xi Chemical), Maitou, Japan's Shin-Etsu, etc., a number of which have production facilities in China, the domestic also Sinopec, China Blue Chenguang, Dongyue New Material, Hesheng Silicon Industry and other manufacturers.

fluids

Perfluoroalkyl polyether PFPE is completely composed of carbon, fluorine and oxygen, colorless, odorless, chemically inert, very good thermal stability and non-flammable properties, and was mainly used in military and aerospace applications in the early days. Nowadays, fluorine oil and grease are used in aerospace, electronics, nuclear energy, chemical industry, automobile, textile, packaging and other industries as special lubricating grease with high temperature resistance, acid and alkali resistance and radiation resistance. Fluorinated fluids are mainly used in chip manufacturing processes for electronic chemicals, precision cleaning, lubrication, protective coatings, temperature control cooling and other fields.

Perfluoropolyether oil was firstly developed successfully by DuPont, and the main suppliers of fluorine oil and fluorinated fluid in Chinese market now include Como (from DuPont), Solvay, 3M, Daikin, etc. With the booming development of electronic chip industry, fluorinated fluids have become a popular investment field in China, and alternative products have been launched, which has alleviated the supply pressure to a certain extent.

Additive supply analysis
Lubricating grease is mainly composed of base oil and additives, additives are an important part of the lubricating oil, used to enhance and improve the performance of the lubricating oil, improve the lubrication efficiency, reduce environmental pollution, enhance the stability of machinery and equipment under extreme conditions, it is a key component in determining the performance of the lubricating oil.

Distinguished by the type of lubricating oil and grease, the internal combustion engine oil additives market accounted for more than 70%, industrial grease additives accounted for about 20%, and the others are specialty additives.

The lubricant additives market is characterized by a large number of players and fierce competition, with foreign brands controlling the high-end market for a long time. The so-called “Big Four” in the additives market refers to four U.S. companies that dominate the additives market, including Lubrizol, Runnymede, Chevron Orenai and Afton Chemical. The “Big Four” have adopted a global layout strategy, with production facilities in North America, Europe, Singapore, Japan, India and other places, supplying fuel additives, automotive engine oils, marine oils, transmission oils and industrial greases, metal processing additives.

European companies such as BASF, Evonik and LANXESS also have a strong presence in the high-end additives and niche additives business.

China is one of the major sales markets for imported additives, and the “big four” imported additive brands have long laid out their presence in the Asia-Pacific market, with Singapore as the production and supply hub to serve the Chinese market. The “big four” also layout localized production in China, including Lubrizol's base in Zhuhai, with a capacity of 238,000 tons / year, serving China and radiation in the Asia-Pacific region; Run Yinglian Zhangjiagang base with a production capacity of 100,000 tons / year in the first phase, but also has a joint venture additives plant with Sinopec; Chevron Auréné in Ningbo, relying on the advantages of the port, the first phase of the Chevron Orenai's base in Ningbo, relying on the advantages of the port, has a production capacity of 50,000 tons/year; Afton's plant in Suzhou mainly produces high-end lubricant additive packages, with a production capacity of 0.6 million tons/year.

Domestic additive manufacturers in addition to PetroChina, Sinopec system of its own additive production capacity, in recent years to Ruifeng New Materials, LiAnLong (Container) as the representative of the emerging forces of rapid capacity expansion, in the field of general-purpose automotive and industrial compounds on the “big four” substitution effect is obvious. Ruifeng New Material is fully developing lubricant additives, specialty additives and synthetic ester base oil business. Liyanlong strategic layout of the lubricant additives business, antioxidant category complete, after the acquisition of Jinzhou Kantai, has a full range of automotive and industrial lubricant additive packages and single agent product line. There are also a number of domestic manufacturers of automotive and industrial additive packages and single agents.

(Photo: Ruifeng New Material)
Influenced by multiple factors such as the accelerated penetration of new energy vehicles, the implementation of new standards, the extension of the oil change period, and the clearing of production capacity in some industrial industries, the competition in the domestic automotive lubricant and general industrial lubricant market is inherently fierce, and in recent years, apparent consumption has shown a downward trend, which has aggravated the competition in the additives market. Like other industries, for a long time, China's additives market has the same structural contradictions, due to technology and brand advantages, the U.S. brands rely on the long-term advantages of technology, brand and supply chain. Dominance in the high-performance additives market. Ordinary type of compound additives and single agents are in surplus, high-end additives, special additives market domestic varieties are not many, insufficient performance, unstable quality, still rely on imports.
Therefore, excluding a few market players who use tariffs to raise prices and create supply constraints, the high-end additives market is under pressure from short-term supply shortages and long-term cost increases. How to turn pressure into power is a problem that lubricant practitioners need to solve.
In the additives market, there is also a class of manufacturers, the scale is not large, but the products provided by the very distinctive, either in a category on the no one I have, or product performance is very strong, substitution on a certain degree of difficulty, the need for a long period of time and efforts to gradually realize the localization of inputs and efforts. For example, the U.S. Vanderbilt provides more than 50 kinds of specialty additives, including antioxidants, extreme pressure antiwear agents, wear reducers, metal passivators, rust inhibitors, etc., of which the MOLYVAN organic molybdenum series, energy-saving automotive oils, special industrial grease formulations to use; the U.S. King's KINGS is a supplier of specialty additives and synthetic base oils, the products are used in industrial and automotive lubricants, greases, metal working fluids, rust preventive oils, and so on. KINGS is a supplier of specialty additives and synthetic base stocks for industrial and automotive lubricants, greases, metalworking fluids, rust preventive oils, etc. The product line includes NALUBE KR series of alkylated naphthalene synthetic base oils, NA-SUL sulfonate technology for high-end lubricating oils and greases, K-CORR series of rust and corrosion inhibitors, and NA-LUBE series of extreme pressure, anti-wear and anti-oxidants.

02 Lubricant Finished End Analysis-Specialty Grease
China's specialty grease market, in addition to Sinopec has a large-scale synthetic grease plate, the market is basically occupied by the United States, Europe and Japan and other foreign brands, Mobil, Chevron, Shell, Total, Foss, BP Castrol and other brands are provided with special lubricating grease, Dow, Clariant, BASF, and other companies relying on the advantages of synthetic base oils and additives resources, but also not a small special lubrication plate. Quaker Good Fulton, on the other hand, is the No. 1 brand in metalworking.
In addition to the above comprehensive international energy and chemical companies, many U.S. and European enterprises in the specialty fats and oils market segments in a leading position. For example, AMSOIL supplies a full range of synthetic automotive oils, wind turbine gear oils and other high-end industrial oils to the Chinese market; REDLINE supplies synthetic ester oils; Lubrizol, in addition to being one of the “Big Four” additives companies, has a wide range of layouts in the field of speciality lubricants, and its sub-brand, CPI, is a leader in the fields of fully synthetic gas compressor oils, refrigerator oils, air compressor oils, synthetic industrial oils, food-grade lubricants, and other specialties. Lubrizol, in addition to the “Big Four” additives company, has a wide layout in the field of specialty lubricants, its sub-brand CPI in the field of fully synthetic gas compressor oils, refrigeration oils, air compressor oils, synthetic industrial oils, food-grade lubricants, etc., SOLEST specializes in the refrigeration oil market, and the other sub-brand PARATHERM to provide special thermal oils; Dow Corning MOLYKOTE is a major supplier of silicone oils and silicone greases; CHEMOURS Fluorine oils and fluoro-fluoro-fluoro greases are used for all kinds of high-end lubrication occasions; ITW Polymerization ITW has a number of specialty lubricant brands: ROCOL, ACCULUBE, WYNN'S, QMI; WHITMORE provides lubricants for heavy industry; LUBRIPLATE and JAX specialize in food grade lubricants.
China's specialty lubricants market is also active in LANXESS (its special oils sub-brands include ANDEROL ANDEROL fully synthetic industrial lubricants, EVEREST synthetic refrigeration oils, ROYCO aerospace greases, REOLUBE anti-flammable hydraulic oils), Germany's Klüber SUMMIT - a leading brand in the field of speciality lubricants, Unikat, Pyrotek and other trace lubrication brands, Basso, Ouhai, Bike, Chuangshuo and other metalworking fluid brands, as well as Shin-Etsu, Synergy, Matsumura, Kanto Kasei, Ushiru and other Japanese specialty grease brands.
Of the brands mentioned above, specialty lubricants of U.S. origin will be directly impacted by the tariff war in the short term, as already reflected in the end market. Users may have to deal with price increases and supply disruptions in the near term. Specialty lubricants from Europe and Japan will also be disturbed by supply chain fluctuations and stock-outs of some varieties.

TPI OIL is with you

TPI OIL has been devoted to technological innovation for more than ten years, possesses a number of invention patents and proprietary technologies, and has accumulated rich experience in the application of special oils and chemicals. In the field of special lubricating grease and green chemicals, a number of JCDecaux's sub-categories can replace imported products affected by the tariff war in real time.

Introduction to some specialty additives
Food Grade Circulating Oil Compound - China's only NSF certified HX-1 grade circulating oil compound, which can be used in a stepwise manner by manufacturing companies to blend food grade hydraulic oils, gear oils, bearing oils and circulating oils. Food Grade Compressor Oil Compound - China's only NSF certified HX-1 food grade compressor oil compound can be used to blend fully synthetic and semi-synthetic food grade compressor oils with different oil change intervals. Gas Compressor Oil Complexes - Used for blending V, IV and mineral gas compressor oils. Refrigeration oil complexes - for the blending of fully synthetic refrigeration oils. Air Compressor Oil Complexes - for the blending of fully synthetic and semi-synthetic screw, centrifugal, reciprocating and sliding vane compressor oils. High Temperature Chain Oil Complexes - for blending synthetic ester, polyether and hydrocarbon high temperature chain oils. Biodegradable lubricant packages - for blending of biodegradable hydraulic and gear oils meeting the European eco-label.
Some Specialty Lubricating Greases
Perfluoropolyether grease, silicone oil and silicone grease, food-grade lubricating grease (61 subdivided varieties), air compressor oil, gas compressor oil, freezer oil, vacuum pump oil, trace lubrication products, non-staining oils and fluids, high-speed grinding oils and fluids, polyether-type industrial oils, cost-effective wind turbine lubrication products and aftermarket maintenance chemicals, and chemicals for aluminum processing processes.