Entrepreneurial opportunities in the industrial lubricant industry!

Entrepreneurial opportunities in the industrial lubricant industry!

As the "blood" of modern industrial machinery and equipment, industrial lubricating oil plays a vital role in industrial development. In this article, some entrepreneurial opportunities in industrial lubricants related formats are briefly discussed. At present, most of the finished industrial lubricants are monopolized by large companies. In the lubricating oil additives, lubricating equipment, and Base Oil-related catalysts in the industrial chain and pan-related formats, which will be a better entrepreneurial opportunity?


PART.01 Lubricating oil additives

Additives are the essence of modern advanced lubricating oil, the correct selection and reasonable addition can improve its physical and chemical properties, give new special properties to lubricating oil, or strengthen its original performance, to meet higher requirements. The raw materials of lubricating oil additives are mostly downstream products, by-products or derivatives of crude oil, mainly base oil, isoctyl alcohol, diphosphorus pentasulfide, styrene, zinc oxide, tetrapolypropylene, salicylic acid, alpha olefin, polyisobutene, diphenylamine and so on. The additives mainly include lubricating additives and physical additives, lubricating additives mainly play a lubricating role, and physical additives are to improve the physical properties of lubricating oil and grease to adapt to special conditions.

In terms of market size, according to An Junxin's "Domestic and Foreign Lubricant Additive Market Analysis" and Huajing Industry Research Institute data, the global lubricant additive market is vast, and the market size in 2021 is about 16.9 billion US dollars, of which the domestic market accounts for about 18% of the global market. The number of traditional internal combustion engine vehicles in China exceeds 300 million, and the number of construction machinery continues to rise, which will provide effective support for the domestic lubricating oil additives market, and the electrification trend has limited impact on the domestic lubricating oil additives market in the short and medium term. We expect that the domestic lubricant additive market will exceed 25 billion yuan in 2025, corresponding to the compound annual growth rate of 3.3% from 2021 to 2025. In terms of competitive landscape, Lubrizol, Infineum, Chevron Oronite, Afton Afton combined account for about 85%. Chinese companies mainly include Ruifeng New Materials and Lianlong, among which Ruifeng New Materials will achieve revenue of 3.046 billion yuan in 2022, net profit of 588 million yuan, and the latest market value of the company is 14.881 billion yuan (as of the date of writing).

The international market has formed a market competition pattern dominated by four internationally renowned lubricant additive companies, Lubrizol, Runying, Chevron Oronite and Afton. Due to the late start of the history, the engine industry is underdeveloped and other reasons, China's engine oil standards and even test and evaluation standards have been extended to the United States standard for a long time, especially in high-end internal combustion engines, wind power, nuclear power, military equipment and other fields of high-end lubricants and additives are strongly monopolized by foreign companies, internal combustion engine oil compound formulations generally need to pass the United States API certification.

In recent years, domestic private lubricant additive enterprises, starting from the production of single-dose products and low-end composite products, continue to increase research and development investment while maintaining their own cost-effective advantages, improve product technology level, and actively serve downstream manufacturers, so as to expand the market share of domestic additives, and make breakthroughs in the high-end composite agent market. In September 2016, the engine oil Chinese standard development innovation Alliance was established, and the industry will gradually introduce the lubricating oil standard system and lubricating oil product technical standards that meet the technical characteristics of China's engine technology. This move will break the first-mover advantage of foreign lubricant additive products to a certain extent and enhance the competitiveness of domestic lubricant additive enterprises.

In recent years, with the intensification of Sino-US trade friction, the country has fully recognized the importance of import substitution, and the lubricating Oil Additive industry is currently an industry dominated by foreign capital, and there is a large import substitution market space. At the same time, the rise of anti-globalization trends in recent years, especially the superimposed geopolitical conflicts, has brought major challenges to the global lubricant additives supply chain, and also brought rare development opportunities for new entrants in the competitive industry.


PART.02 Lubrication equipment

Lubrication equipment is a typical representative industry of industrial lubricating oil related formats, as the name suggests, lubrication equipment is the use of lubricating materials (lubricating oil or grease) to other equipment or machinery to lubricate advanced equipment, which is mainly the lubricating oil or grease into the parts that need lubrication, so as to lubricate the object to be lubricated. Lubrication equipment has a wide range of applications, including but not limited to wind power generation, iron and steel metallurgy, mining machinery, transport machinery, cranes and many other fields.

Lubrication equipment has high industry barriers, mainly including:

1) Technical barriers: The manufacturing of lubrication equipment involves metal precision processing, sealing technology, mechanical design, embedded software and other multidisciplinary technologies, with a high technical threshold, and different downstream industries, customer groups, product application scenarios on its centralized lubrication system requirements are not the same, different application fields of lubrication equipment design and research and development have commonalities, but also have differentiation.

2) Process quality and mass production capacity barriers: most of the downstream industries of lubrication equipment have entered the development stage of full competition, customers in order to reduce inventory and control costs, in addition to product quality, reliability, stability and technical indicators have consistently strict standards, the timeliness of supply, cost control ability have more stringent requirements.

3) Customer barriers: The downstream customers of high-end lubrication equipment are often large fan manufacturers or construction machinery companies with strong financial strength, large scale and complex business systems, which have strict selection criteria for the reliability and stability of supporting centralized lubrication systems.

In terms of market pattern, representative companies include:

1) SKF Group: SKF Group is one of the world's leading suppliers of bearings, seals, mechatronics and centralized lubrication systems. On October 19, 2010, SKF Group held a press conference to officially announce its acquisition of Lincoln Holdings, a leading supplier of lubrication systems and tools.

2) Becca Group: Becca Group is committed to providing customers with customized system lubrication, environmental protection technology systems and other solutions. The company has three production bases in Germany, with a wide range of products, involving industrial lubrication systems, mobile vehicle lubrication systems, jet lubrication systems, packaging, filling mechanical lubrication systems, wind power equipment lubrication systems, wood production mechanical lubrication systems, etc. Becca Group has branches and agents in all important international markets such as China, the United States, France, South Korea, Canada, the Netherlands and other countries, and the sales system and production system are huge and complete.

3) Valley (Foshan) Intelligent Equipment Co., LTD. : Valley Intelligent is an enterprise engaged in the research and development, production and sales of centralized lubrication system, the company has a certain technical research and development capabilities, has a number of patented technologies, and is equipped with advanced special precision machine tools, die-casting machinery and other high-tech automation large-scale equipment, the company's products have formed a certain brand advantage in the centralized lubrication system industry, has been widely recognized by customers.

4) Zhengzhou Aote Technology Co., LTD. : The company's main business is the production and sales of centralized lubrication system and provide solutions and technical services for end users. At present, the company's main product application areas are to provide centralized lubrication system products for commercial vehicles, special vehicles, construction machinery, wind power equipment, large equipment and other mechanical devices.

5) Pangu Intelligent: The company is a national high-tech enterprise mainly engaged in the research and development, production and sales of centralized lubrication system and its core components, and is committed to the development of centralized lubrication system with independent intellectual property rights and core competitiveness. The business field of Pangu Intelligent is mainly in the field of fans, and it is one of the leading enterprises in the domestic fan lubrication system industry. Pangu Intelligence achieved revenue of 340 million yuan in 2022, and the latest market value of 5.7 billion yuan (as of the date of writing).

Lubrication equipment has a wide range of applications, but there are fewer players at present, and more players focus on one or several areas of business, resulting in a competitive advantage in other industries is not strong. We believe that in the field of lubrication equipment, the relatively scarce is the excellent supplier in other fields besides wind power generation, which may be a relatively ideal entrepreneurial opportunity.


PART.03 Base oil related catalysts

Simply put, industrial lubricants consist of a combination of base oils and additives. Among them, the lubricating oil base oil is the core component of the lubricating oil, which accounts for about 85%-90%, therefore, the performance and quality of the base oil directly determines the performance and quality of the finished lubricating oil. Lubricating oil base oil is mainly divided into three categories: mineral base oil, Synthetic Base Oil and vegetable oil base oil.

1) Mineral oil base oil: extracted from crude oil. In the production of mineral lubricants, the most important thing is to choose the best crude oil. The chemical composition of mineral base oils consists of high boiling point, high molecular weight hydrocarbon and non-hydrocarbon mixtures. Its composition is generally alkanes (straight chain, branched chain, multi-branched chain), cycloalkanes (monocyclic, bicyclic, polycyclic), aromatic hydrocarbons (monocyclic aromatic, polycyclic aromatic), cycloalkyl aromatic hydrocarbons and organic compounds containing oxygen, nitrogen, sulfur and other non-hydrocarbon compounds such as gum and asphaltene.

2) Biological base oil (vegetable oil) : can biodegrade and rapidly reduce environmental pollution, but the cost is higher.

3) Synthetic base oil: including PAO polyalpha dilute hydrocarbon synthetic oil, polyether synthetic oil, alkyl benzene oil, etc.

Of the three base oils, mineral base oils are widely used, but some applications must use synthetic base oils or vegetable (bio-based) base oils. The original use of synthetic lubricants was to meet military needs. The advancement of synthetic lubricating oil process technology and the improvement of product quality as well as the increase in market demand have promoted the development of synthetic lubricating oil production technology and commercialization. At present, synthetic lubricants have been widely used in aviation, automotive, machinery and other fields. Common synthetic lubricating oil mainly includes polyolefin, synthetic ester, polyether and alkylated aromatics, and polyolefin is the most mainstream synthetic oil.

At present, polyolefin synthetic lubricants mainly include: polyalpha-olefin synthetic lubricants (PAO) and polyethylene synthetic lubricants. PAO is an alkane oligomer with regular structure, which is obtained by catalytic polymerization and hydrogenation of α-olefin. The PAO obtained by catalytic polymerization of metallocene is generally called mPAO, and the PAO synthesized from coal to olefin is called coal-based PAO. Compared with traditional mineral lubricants, PAO has the advantages of viscosity and temperature performance, oxidation stability, low temperature fluidity, low evaporation loss, and is currently the most ideal comprehensive performance of the lubricating oil base oil, which has an irreplaceable role in national defense, high-end manufacturing, and civil industry.

Polyalpha-olefin (PAO) synthetic base oil is a kind of hydrogenated alpha-olefin oligomer obtained from one or more linear alpha-olefin oligomerization under the action of catalyst, and through distillation, hydrogenation and other processes. The chemical structure of low-viscosity PAO is a relatively regular iso-alkanes with long side chains. It has the characteristics of high viscosity index, low pour point, good oxidation stability, high flash point and low volatility, and plays an irreplaceable role in aerospace, military and other sophisticated fields. At the same time, it is also an important raw material for the production of high-grade lubricating grease in advanced automobile, wind power, high-speed rail, intelligent manufacturing and other industries. With the technical progress of internal combustion engine and various mechanical equipment, the performance of lubricating oil is increasingly demanding, and the application of PAO synthetic base oil has been paid more and more attention, and the market demand for PAO is increasing. However, limited by raw material supply, production technology, environmental protection and other factors, domestic low-viscosity PAO is still mainly dependent on imports. Therefore, in recent years, domestic research on low-viscosity PAO has been continuously strengthened.

In terms of market, the industrial production and development and application of liquid polyolefin mPAO in foreign countries have been less than ten years. At present, only ExxonMobil, Chevron, Ineos, LANXess and Idemitsu are five foreign companies producing mPAO products, but they do not transfer technology to other countries. Liquid polyolefin is widely used in aviation, wind power generation, high-speed rail, heavy duty vehicles, ocean ships, steel, cement industry and other important industrial equipment, high-end products all rely on imports (stock market). Exxonmobil's SpectraSyn Elite mPAO product is the highest comprehensive performance of high viscosity synthetic lubricating oil base oil at the present stage, and Mobil's 300cSt viscosity of metal cene polyalpha-olefin (mPAO) products are strictly restricted to export to China. And in the harsh high and low temperature operating conditions still show its excellent lubrication performance, viscosity of 300cSt and above ultra-high viscosity mPAO, at present, no company in the world can achieve industrialization. According to statistics, China's base oil market reached 8 million tons [China imported 2.8 million tons of high-end base oil and mPO in 2017, and 2.6 million tons in 2018; liquid polyolefin (mPO) technology is a "stick neck" project that China must be localized].

As the market has been monopolized by overseas manufacturers for a long time, and the technical difficulty is extremely high, the industry can achieve mass production and have a certain competitive advantage of domestic manufacturers less, in recent years, the application of metallocene catalyst production of polyolefin products increased rapidly and with its excellent material characteristics to occupy the market, belonging to the Chinese enterprises have come the opportunity.