Japanese Ethylene Production to Decline Through 2011

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Researched by Industrial Info Resources (Sugar Land, Texas)--Japan has an ethylene output of approximately 7.5 million tons per year, produced at 15 sites throughout the country. Capacity, however, will more than likely continue to fall throughout 2011, despite a slight recovery in exports at the end of 2010. Global demand for ethylene has dropped significantly since the early 2000s, and a flood of cost-effective products from the Middle East and China are stirring Japanese producers to cut costs and production.

Domestic facilities, most of which date back to the 1950s, also are falling into decay, and are unable to keep up with the newer, more cost-effective plants coming online in the Middle East. A decline in domestic demand for downstream derivatives, plus cost-effective foreign products, has kept ethylene producers from updating facilities.

Mergers and alliances also will come to fruition this year. Mitsubishi Chemical Corporation (TYO:4188) (Tokyo) and Asahi Kasei Corporation (TYO:3407) (Tokyo) plan to integrate and unify naphtha-cracking efforts to decrease ethylene production. Mitsubishi recently announced that it would cease production of petrochemicals after 2012, in favor of retooling to produce materials required for rechargeable batteries. For more information on the merger between Asahi Kasei and Mitsubishi Chemicals, see February 18, 2011, article - Mitsubishi Chemicals to Scrap Petrochemicals in Favor of Rechargeable Batteries.

Idemitsu Kosan Company Limited (TYO:5019) (Tokyo) and Mitsui Chemicals (TYO:4183) (Tokyo) plan to form a limited liability party to import ethylene from abroad, to represent about half of each company's needs. On its own, Mitsui plans to utilize ethylene for the production of styrene butadiene tires to be manufactured in Thailand. The company is also planning to incorporate a C5 hydrocarbon residue-recycling program at its facility in Chiba. Recycling will result in a product similar to ethylene, and Mitsui is hoping to recover at least 11,000 tons per year through the program. For more information on Mitsui's C5 recycling plans, see January 13, 2011, article Hydrocarbon Residue Recycling Could See Development in Japan.

Turnaround schedules for sites not marked for demolition and dismantlement seem to be remaining on track. So far, companies are expecting at least $52 million in total turnaround costs for the second and third quarters.

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