C&EN profiles China Catalyst Group, a young company that emphasizes R&D

It’s often said that innovation is not a strength of Chinese chemical makers. In the northeastern city of Dalian, China Catalyst Group (CCG) is proving itself an exception to that rule by developing specialty zeolite catalysts. Though the young firm has so far focused on the Chinese market, some of its products are beginning to draw interest from companies in the West.

Derived by reacting solutions of alumina, silica, and sodium hydroxide, zeolites are aluminosilicates with a well-defined network of micropores in which chemical reactions are encouraged to occur. Synthesizing sophisticated zeolites requires the incorporation of structure-directing agents—quaternary ammonium hydroxides and other compounds that tailor the zeolite’s pores to catalyze a desired reaction.

CCG claims to be unique in that it manufactures both zeolite catalysts and structure-directing agents, also known as templates. “China Catalyst Group makes its own templates, and this is what will enable us to become a major world player,” says Jin Li, president and chair of the company.

Formed only eight years ago, CCG largely ignores the oil refining market, the largest outlet for zeolite catalysts, and focuses instead on catalysts for chemical synthesis. Two years ago, it joined with Chinese partners to create two joint ventures that depend on CCG catalysts and technology to produce fine chemicals.

One venture, China Catalyst Huabang, takes advantage of CCG’s expertise in C4 chemistry. It claims the largest production capacity in China for prenol and its intermediate materials, adamantane, N-tert-butylmethylamine, and tert-amylbenzene. The other venture, China Catalyst Chunjiang, is not yet operating but will produce insecticides, fungicides, and their intermediates.

At its headquarters in Dalian, CCG employs nearly 200 people in administrative offices, production facilities, and an adjacent R&D center. About 10% of its employees are in R&D, and many others hold technical jobs. In 2015, the company’s sales amounted to $70 million.

Li attributes CCG’s success to date in part to its location in Dalian. The Dalian Institute of Chemical Physics, where he worked as a researcher before founding CCG, is China’s foremost center of excellence in catalyst research and his company’s main source of scientific talent. In addition, he points out, by focusing on the particular needs of the Chinese market, CCG does not compete head-on against Western catalyst suppliers such as BASF, W.R. Grace, and Zeolyst International.

CCG, for example, supplies more than two-thirds of China’s demand for TS-1, a catalyst used in reactions involving hydrogen peroxide. Among the company’s most promising products, Li says, is a catalyst that improves the conversion of methanol into olefins, which is a common industrial process in China because of the abundance of coal for methanol production.

The company also has developed an automotive exhaust catalyst that BASF is interested in, according to Li. The German firm declines to confirm his claim.

CCG’s success is surprising because the zeolite catalyst market is a hard one for Chinese producers to crack, observes Hongyu Huang, a former Johnson Matthey executive who now runs his own catalyst supply firm, ByCatalysis Technology, in Hangzhou, China. “In zeolite catalysts, you need the ability to develop applications, an area that Western firms are usually better at,” Huang says.

And lower costs, a typical strength of Chinese manufacturers, are not important in the zeolite catalyst market, adds Kenneth M. Stern, a New York City-based senior managing director at FTI Consulting who has worked in the chemical industry for 40 years. “Success in the zeolite catalyst business is more about performance than cost,” Stern says.

CCG is particularly proficient at producing catalysts that perform as expected, says Gabriele Centi, a professor of industrial chemistry at Italy’s University of Messina who is president-elect of the International Association of Catalysis Societies. For the past year, Centi has been an adviser to CCG as the company starts to explore opportunities outside China.

“They have the ability to make their own templates and to produce the same quality of products consistently,” he says. “It’s a nightmare if you try to work with catalysts that aren’t consistent.” CCG’s decision to colocate its production and R&D facilities is a key reason for the company’s success, Centi notes.

The two joint ventures that CCG formed in 2014 illustrate the value that some users place on the firm’s technological capabilities. In both cases, CCG received a 51% stake in the ventures even though it put no money down. Its contributions are technology and catalysts.

CCG, Centi argues, is an example of a Chinese industrial company that has nurtured the ability to develop its own differentiated products. Until recently, he says, industry in China tended to emulate, or in some cases “rip off,” Western technology. “In chemicals, now, China is becoming innovative,” he says.