Growth Opportunities in the Chinese Fuel Additives Market
December 27 2017 - 9:59AM
PR Newswire (US)
LONDON, Dec. 27, 2017 /PRNewswire/ -- The Chinese diesel
market is set to grow at a robust pace over the next 5 to 7 seven
years as production of diesel vehicles increases and the
introduction of China V specifications takes center stage.
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The implementation of China V regulations is key to the consumption
of diesel, and in turn, lubricity improvers (LI) and cold flow (CF)
additives. Lubricity improvers are estimated to grow at a strong
CAGR of 11.9% between 2016 and 2022 while cold flow additives,
which are predominantly used in winter diesel, will grow at a lower
CAGR of 2.8%. Excess kerosene availability in China will also be a challenge for the growth
of cold flow additives, as it is a cheap alternative. Local players
in China currently dominate the
supply of LI and CF additives to Sinopec and Petrochina.
The local players that dominate the market have excellent
relationships with both Sinopec and Petrochina. These relationships
are long-standing ones which gives them an edge over new
entrants.
New companies trying to tap opportunities in the LI and CF market
in China are advised to partner
with the domestic players, as it will enable them to get a ' foot
in the door' with the state-owned enterprises. Owing to these
long-standing relationships, the technical specifications set by
the refineries are published in such a way that most of these
domestic players will qualify. International additive companies
have superior technical specifications as compared to domestic
players, but these improved specifications are often perceived as
premium or expensive.
The procurement process for LI and CF is different between Sinopec
and Petrochina. While Sinopec is predominantly a consumer of LI,
Petrochina is a large consumer of CF, as Petrochina produces larger
quantities of winter-grade diesel due to its locations in colder
regions across China.
While the procurement process for Sinopec is done completely at the
headquarter level, the process for the procurement of CF is left to
individual Petrochina refineries. This difference in the tender
processes has made domestic additive manufacturers increase their
sales and marketing staff in order to have a constant presence at
the location of various refineries.
There are however interesting ways by which international LI and CF
players can enter the China market
and be successful. One of them is to partner with a strong domestic
additive manufacturer.
The other option is to provide value-added services such as
refinery economics exercises, training workshops for refinery
personnel on the advantages of using CF over kerosene as well as
joint R&D exercises. These services will go a long way in
building relationships with refineries, which is the cornerstone of
success in the diesel additive market in China.
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