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Asia: Japan

12.01.2012  |  Yoneyama, M.,  IHS Chemicals, Tokyo, Japan

Keywords: [petrochemicals] [refining] [crude oil] [natural gas] [economics]

The Japanese economy showed steady recovery for 2003–2007. However, due to the global recession in late 2008, Japan’s GDP growth decreased to –1% in 2008 and to –5.5% in 2009. Due to the counter-effect from the low growth rates in 2009 and 2010, the GDP growth rate showed high recovery of 4.4% in 2010. In 2011, the earthquake on March 11 damaged some manufacturing plants in the Tohoku and Kanto Districts. The damage to part producers in Tohoku District disrupted the “supply chain” to user industries, especially the automobile industry. As a result, 2011 automobile production in Japan decreased by 13% from 2010 levels.

Production and consumption: Ethylene

Table 1 summarizes Japan’s ethylene production and ethylene-equivalent consumption and trade. The ethylene-equivalent demand increased during 2002–2007. However, it decreased in 2008 and 2009 because of the global recession. In 2010, ethylene-equivalent consumption recovered, but it decreased again in the following year. In 2011, the exports of ethylene-equivalent chemicals decreased and imports increased.



Table 2 shows the correlation between the growth of ethylene-equivalent demand and GDP growth. The table shows that domestic ethylene-equivalent demand strongly correlated with economic conditions. Although the growth rate of domestic demand has the same tendency as the GDP growth rate, ethylene-equivalent consumption is less than that for GDP. A possible explanation is that petrochemical-consumer companies have been shifting their manufacturing base from Japan to other Asian-Pacific countries and increasing imports of finished goods, such as electrical appliances, toys and plastic bags.



Fig. 1 shows that the volatility of ethylene-equivalent demand is higher than the volatility of GDP. This can be explained by the inventory cycle. Production cannot be modified as quickly as inventory during recession times. Consequently, these conditions cause overshooting or undershooting of ethylene-equivalent demand against GDP changes. Fig. 2 shows domestic monthly ethylene production rates for 2010 and 2011.

  Fig. 1.  Ethylene demand and GDP growth:
  2000–2011.


  Fig. 2.  Monthly ethylene production.



The March 11 earthquake damaged chemical plants and refineries in Tohoku and Kanto Districts. Four ethylene crackers were shut down; these crackers have a total ethylene production capacity of 1.8 MMtons and account for 23% of Japan’s ethylene capacity. Among these four crackers, two crackers were started up less than one month after the earthquake. The other two ethylene plants were started up in May and June of 2011. Due to the shutdowns, ethylene production was lower in 2011, as shown in Table 1. However, Japan’s ethylene production was affected more by the global economic slowdown triggered by the euro crisis.

Fig. 3 shows the monthly ethylene-equivalent consumption and net exports in Japan. Please note that the monthly statistics include a time lag between calculated and actual consumption because of inventory changes. Ethylene-equivalent consumption was affected by the March 11 earthquake. Consumption sustained a relatively high level from April to August of 2011 because of the recovery and reconstruction. However, consumption began decreasing in September 2011 due to the global slowdown.

  Fig. 3.  Ethylene-equivalent consumption.



Aromatics

Table 2 summarizes aromatics production from 2000–2011. Like ethylene, the aromatics production also increased during 2003–2007; however, it dropped by 9% in 2008 and by 4% in 2009. In particular, benzene decreased by 13% in 2008 and further decreased by 7% in 2009 due to low styrene monomer (SM) production. Conversely, xylene production did not decrease so much due to steady demand for paraxylene (PX) and purified terephthalic acid (PTA). Toluene production is linked to the operating rate of disproportionation and dealkylation units. Aromatics production recovered in 2010 but decreased in 2011.

Table 3 shows production and consumption (trade) of aromatics in 2010 and 2011. As shown in Table 3, benzene production and consumption decreased in 2011 due to low SM production and declining exports. Toluene production also decreased due to declining exports. However, toluene consumption increased by 9% because of strong demand for disproportionation units and gasoline blending components. Xylene production decreased as several production facilities were damaged by the earthquake. Demand remained low until summer 2011, but recovered in Q4 in response to growing demand by other Asian-Pacific countries.



Trade

As shown in Table 1, Japanese ethylene-equivalent exports increased during 2001–2007 in response to the steady growth of the world economy, especially in Asian-Pacific countries. However, in 2008, exports decreased by 24% due to the global recession. In 2009, exports increased and sustained high levels through 2010, fueled by growing petrochemical demand in other Asian-Pacific countries. However, exports decreased in 2011 mainly due to earthquake damage to petrochemical production facilities. The economic slowdown in late 2011 also adversely affected exports.

Ethylene-equivalent imports in 2011 increased by 33% to make up for production shortages caused by the March 11 earthquake. A strong yen also stimulated imports.

From Fig. 4, it can be seen that ethylene-equivalent net exports decreased, especially from April to July 2011, due to production facility damage. After the summer, net exports recovered as the facilities again began operating. However, with slower economic conditions in late 2011, ethylene-equivalent exports decreased in November and December. A strong yen also affected the situation, with decreases in exports and increases in imports.

  Fig. 4.  Ethylene-equivalents net exports.



Profits

Table 4 summarizes sales and profit for the petrochemical segment of 11 Japanese chemical companies operating ethylene crackers. The profit of the petrochemical segment showed cyclicality in the past. Since the trough of 2001, profits and sales increased due to a tight supply-and-demand situation until 2007. However, a loss was recorded from late 2008 to March 2009. The financial loss continued in fiscal 2009, but it recovered in 2010. It was estimated that fiscal 2011 would be a difficult year for the petrochemical industry. Effects from the earthquake and declining export levels along with low petrochemical demand—especially in the automobile, electrical and electronics industries—still remain.



Investment

Japanese petrochemical companies actively invest in both domestic and overseas markets. The companies prefer commodity chemicals for overseas investment projects, and they focus on high-performance chemicals and feedstock ventures in Japan.

In commodity chemicals, almost all investments are made in countries with abundant raw materials, such as the Middle East, or nations with growing consumer markets, such as other Asian-Pacific countries. Sumitomo Chemical started up its ethylene complex in Rabigh, Saudi Arabia with Aramco in March 2009. Mitsubishi Group companies have invested in a cracker project in SHARQ, Saudi Arabia. Mitsui Chemical announced its alliance with SABIC in the urethane business in February 2012. Mitsui will license its toluene diisocyanate and methylene diphenyl diisocyanate process to SABIC.

In China, several projects are in progress. In 2009, Mitsui Chemicals started up a bisphenol A (BPA) plant, and it plans to start up a phenol and acetone plant in 2014. Mitsubishi Chemical started up a PTA plant in 2006, a polytetramethylene ether glycol plant in 2009, and BPA plant and polycarbonate plants during 2010–2011. Mitsui Chemical also has been expanding its production capacities in Indonesia, Thailand and Singapore, while Mitsubishi Chemical is expanding its petrochemical production capacity in India.

In domestic investment, petrochemical companies focus on propylene and aromatics rather than ethylene. US-based, low-cost shale gas is changing the competitiveness of North American gas crackers. For propylene, in addition to metathesis plants from Mitsui Chemical and JX Nippon Oil & Energy Corp., Mitsubishi Chemical started up a metathesis plant in Kashima. Furthermore, many companies are now developing technology for on-purpose butadiene production, including Mitsubishi Chemicals and Asahi Kasei Chemicals.

In addition to large-volume petrochemicals, Japanese petrochemical companies are expanding their businesses into value-added products, both in Japan and in other Asian countries, such as performance materials for IT and electronics industries. Engineering plastics are good examples of high-performance products. Japanese companies have invested in specialty engineering plastics projects located in Japan and commodity engineering plastics outside of Japan. Mitsubishi Rayon acquired Lucite International Group Ltd., a leading methyl methacrylate (MMA) producer. Mitsubishi Rayon is expanding MMA capacity in the US, Korea and Saudi Arabia, along with poly methyl methacrylate capacity in Thailand, Korea and Saudi Arabia. Polyplastics, Toray and Sumitomo Chemical have expanded liquid crystal polymer capacities in Japan. Toray, Tosoh and DIC have expanded domestic polyphenylene sulfide capacities. Conversely, Polyplastics plans to start up a propylene oxide/SM plant in Malaysia. HP



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