Mitsubishi Chemical and Asahi KASEI Team-Up to Reduce Ethylene Production

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Researched by Industrial Info Resources (Sugar Land, Texas)--Since 2005, the ethylene market has seen a significant increase in production facilities. Chemical Market Associates Incorporated (CMAI) (Houston, Texas), which specializes in market and business advisory services, has followed the trend closely, pointing out that most of the new facilities have been built in the Middle East and Northern Asia.

CMAI has projected that growth will spread to Southeast Asia and India, during which time the markets in North America, Japan and Europe will experience a decline of up to 30%. This January, the price of ethylene began to steadily decrease due to lack of downstream demand, and the Japanese market is starting to feel the pressure of projected downfall.

Mitsubishi Chemical Corporation (TYO:4188) (Tokyo, Japan) and Asahi KASEI Corporation (TYO:3407) (Tokyo) are taking steps toward reducing ethylene production. At the end of May, Mitsubishi and Asahi signed a memorandum of understanding to create a joint venture that will integrate and unify both companies' naptha crackers in Kurashiki, Okayama prefecture. Both companies have acknowledged the forecasted severity of the Japanese petrochemicals market and the decreasing domestic demand for ethylene.

Mitsubishi's Kurashiki ethylene production complex currently has an annual ethylene output of 500,000 tons; however, the joint venture plans to reduce its production capacity by 50% by 2012. Afterwards, the venture will shut down the ethylene production facility and commence with demolition efforts during the second quarter of 2013. The venture is planning to invest US$3.5 million in the dismantlement and demolition of Mitsubishi's facility.

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