South Korean lubricants firms are trying to advance into the Chinese market with better value lubricant products.
Korean oil producers SK Lubricants and GS Caltex are finding new roads into China, a marketplace whose stringent government restrictions make it notoriously difficult for foreign companies to enter. The two companies recently announced two new projects that are aimed at overcoming the challenges.
Caltex, South Korea's second largest refiner, revealed a deal with Dongfeng Motor Lubricant (DFML) with a view to expanding its market presence through China's automotive market. The partnership will enable GS Caltex to sell its products to Chinese carmakers using DFML's pre-existing sales network and gain significant positioning in the world's second largest auto marketplace, already worth RMB 12tr (US$11 billion).
China’s market currently comprises 46% industrial oils, 38% commercial on-and off-highway automotive oils, and 16% consumer automotive. GS Caltex is aiming to increase the ratio of lubricants exports to oil products from its current 20% to 50%.
Meanwhile, SK Lubricants has announced it will commence building an 80,000 ton lubricants blending plant in Tianjin as part of an 'accelerated global expansion into China', with completion set for December 2011.
SK currently exports finished lubricants to 17 countries worldwide, and hopes to sell 114,000 tons of product annually in China alone, equivalent to the aggregate amount sold in South Korea. Although the consumer automotive market is only at 15% by volume, it accounts for 22% by value, with higher-end engine oils projected to account for 80% of the consumer segment in 2013.