High costs, uncertain demand continue to shroud petrochemical sector in Japan

Japan's steam crackers had escaped serious damage from the March 11, 2011 disaster and were able to recover much faster, as per Platts. Data from Japan Petrochemical Industry Association showed that steam cracker operations dropped from 95.7% in February 2011 to 88.9% in March 2011, but by May had recovered to over 90%. Mitsubishi Chemical had to shut its steam crackers at Kashima because downstream plants, notably its vinyls units, at the same site, had been forced to shut due to damage from the tsunami. The two steam crackers were restarted by the end of June. All propylene units in Japan have also returned to pre-quake levels after JX Nippon restarted its Sendai residue fluid catalytic cracker mid-February. The RFCC can produce 100,000 tpa propylene, of which around 8,000-9,000 mt/month are exported. However, steam cracker operators are facing a new challenge from high naphtha feedstock costs and a strong yen, which has led to a cut in operating margins. This has led to reduction in run rates to below pre-quake levels to 83.1% in January 2012, as per JPIA. Data released by the Ministry of Economy, Trade and Industry showed that in February, Japan's ethylene production fell 4% month on month to 525,600 mt, which was also down 11.9% from January 2011. Naphtha-fed steam crackers in Japan typically boost operating rates in February/March to build up inventory ahead of peak maintenance season in March/April. Margins to produce ethylene from naphtha had been positive for most of Q1-2011 in Japan, before they turned negative in April, switched to positive in May, and thereafter, turned negative in June and have remained in the red. On March 9, margins to produce ethylene stood at minus US$130.88/mt with ethylene CFR Northeast Asia at US$1300/mt and naphtha CFR Japan at US$1080.88/mt. Producers typically need a spread of US$350/mt for breakeven. However, a problem that could hit downstream demand for petrochemicals in Japan is a looming electricity shortage during the June-August summer months. Although petrochemicals complexes have their own power generation facilities, downstream industries such as automobiles are heavily dependent on the power grid. Only two of Japan's 54 nuclear reactors are shut at present, accounting for 2.268 GW, or 4.6% of the country's total installed nuclear capacity of 48.96 GW over 54 reactors, according to Platts calculations. Nuclear capacity represents 21% of Japan's total installed power generation capacity of 228.479 GW.
  More News  Post Your Comment
{{comment.Name}} made a post.




There are no comments to display. Be the first one to comment!


Name Required.


Email Id Required.

Email Id Not Valid.


Mobile Required.

Email ID and Mobile Number are kept private and will not be shown publicly.

Message Required.

Click to Change image  Refresh Captcha