Globalization and Diversification - Development Road of
Lubrizol

By Man Juan   

In 2004, Lubrizol acquired Noveon International, Inc. for
US$1.84 billion, so that Lubrizol stock rose steadily from US$
25 to US$ 64. Lubrizol's goal is to become one of the most
profitable specialty chemical companies in the world. The
journalist of China National Chemical Information Center
recently conducted a special interview with the two key people
behind Lubrizol China, Mr. Tsung-Fei Tang (left), Vice President
(VP), China for Lubrizol Additives and Mr. Joseph Chai (right),
VP, China for Lubrizol Advanced Materials.

Global Operation

Lubrizol was founded in 1928 and since then has built up its
research and development, production and sales of lubricant
additives. Nowadays, occupying a third of the global market
share, Lubrizol is now the world's biggest supplier of lubricant
and fuel additives.
   Lubrizol highlights its globalization strategy. As early as
1955, the company began to promote regional development among
North America, Europe and Asia, etc, with the U.S. as the base.
The company set up Lubrizol China in Beijing and Shanghai
Lubrizol Int'l Trading Co. respectively in 1994 and 1998.
   Since 1994, it took Lubrizol only two years to work with
Lanzhou Petroleum Processing & Chemical Complex (LPPCC), which
was affiliated with Sinopec Group, and established the joint
venture (JV) Lanzhou Lubrizol-Lanlian Additive Co., Ltd. Later,
the government reformed the petrochemical industry and put LPPCC
under the ownership of CNPC. Lubrizol and CNPC naturally became
partners.
   The partnership with Sinopec Group and CNPC resolved
Lubrizol's problem of raw material resources in China. The JV
now has built up additive factories in Tianjin and Lanzhou of
Gansu province to produce various lubricant additives for
vehicle use.
   Lubricant additives remain the main focus of Lubrizol's
business, including production of engine oil additives and
specialties oil additives (driveline and industrial oil
additives). The sales volume of that lubricant additives
business reached US$ 2.4 billion in 2006, accounting for about
64% of the total sales for the corporation. But, the annual
increase of sales in the lubricant additives business is only
one to two percent today. For Lubrizol, Mr. Tsung-Fei Tang
explained, "the lubricant additive business' main goal is to
increase the performance of the lubricant. But there exists huge
room for development in the emerging markets including Asia,
especially in Chinese market." Mr. Tang shows that for the past
five years the annual growth rate of the Chinese lubricant market
has been eight to ten percent. Therefore Lubrizol established
a new lab in Shanghai in October 2006 to provide technical
support to customers of industrial lubricant additives.

Noveon Acquisition

In Mr. Joseph Chai's eyes, "the acquisition of Noveon
International in 2004 greatly expanded Lubrizol's personal care
and coatings businesses and offered the fastest and most
convenient channel for Lubrizol to enter the plastic polymer
market beyond Lubrizol's core lubricant additives business."
   After the acquisition, Lubrizol underwent large-scale
restructuring of its entire business framework. Five non-core
businesses were divested. The Lubrizol Advanced Materials
business segment was formed, with the Engineered Polymers
business, Noveon Consumer Specialties business and Performance
Coatings business as the three mainstays.
   The Engineered Polymers business consists of thermoplastic
polyurethane (TPU) and engineering polymers. One major product
is TempRite's CPVC (chlorinated polyvinyl chloride), a resin
that goes into the production of pipe assembly. Pipes made of
CPVC have many advantages. Such piping is now mainly used in the
U.S. and will also be used in the swimming pool for the Beijing
2008 Olympic Games. In addition, Lubrizol's Engineered Polymers
business also produces TPU, which is similar to synthetic rubber.
Lubrizol had built a plant producing TPU in Songjiang, Shanghai
since July 2005.
    The Noveon Consumer Specialties products consist of
acrylic-based rheology agent, surfactant, emulsifier,
moisturizers, etc. The global market potential is around US$5
billion and has an annual growth rate of three to five percent.
   As the largest of the Lubrizol Advanced Materials business
segments, the performance coatings business was a combination
from both Noveon and Lubrizol's additive business. The main
products include waterborne acrylic resin and polyurethane,
surface modifier, etc. The global market is US$13 billion and
has an annual growth rate of two to five percent. Mr. Chai
strengthens that the Advanced Material business segment would
be the area with the highest growth, with global sales increasing
at five to six percent in the next five years.
   About the development of the Advanced Materials business in
China, Mr. Chai suggests, "the company will invest US$ 40 million
in building the production base in Songjiang, Shanghai to expand
its business in China. The new production site covers an area
of 31 000 m2 and adjoined to the existing TPU plant."