Japan's petrochem status mixed after earthquake

21-Mar-11
The earthquake which rocked Japan on March 11 has had the most impact on the northern portions of Honshu Island, an area which is relatively less industrialized than the rest of the island, as per Chemorbis. Much of the petrochemical capacity is located in the central and southern portions of the island. Capacities outside the north have been affected indirectly because of temporary shutdowns for safety and logistical reasons. Honshu is the largest of the four main islands of Japan. The earthquake was centered in the far north in Sendai city, which is not a heavily industrialized area. Refineries in the north were affected by the earthquake while petrochemical facilities a bit south of the region in Kashima were also affected. Kashima houses Japan's biggest ethylene crackers operated by Mitsubishi Chemical. Facilities more south at Chiba, one of Japan's petrochemical hubs, and Kawasaki were less affected directly, but many were closed for preventative measures. As of Friday, Cosmo Oil's 220,000 bpd Chiba refinery was still shut because of a fire while JX Nippon Oil and Energy's 145,000 bpd refinery in Sendai and its 252,500 bpd refinery at Kashima were still down. The company plans to restart its Negishi refinery with 270,000 bpd next week. On the other hand, 780,000 bpd or 17% of refining capacity has been or is about to be restarted. Analysts pointed out that after the restarts and due to the three downed refineries with a total capacity of 617,500 bpd, 14% of the country's refining capacity is still shut. This is down from 31% of capacity that had been shut right after the earthquake. As for polymer plants, Japan PE's 260,000 tpa LLDPE and 60,000 tpa LDPE plants are shut in Kashima while Japan PP's 640,000 tpa PP plant at Kashima is shut. Sun Allomer's 127,000 tpa PP plant is also shut at Kawasaki. Prime Polymer said in a statement that its plants in Japan are running normally, but warned that they could face trouble receiving supplies of additives which could affect their production later. Several PVC plants are shut including Kaneka's 178,000 tpa PVC plant at Kashima, Shin-Etsu's 550,000 tpa PVC plant at Kashima, and Taiyo Vinyl's 90,000 tpa plant at Chiba. On the cracker side, it was reported on Friday that four crackers remained down with a total capacity of 1.805 mln tpa. Of the country's 15 crackers, 9 were near the areas affected by the earthquake. According to a Reuter's report, Maruzen Petrochemical which has a 480,000 tpa cracker at Chiba said Friday it was in preparations to restart its cracker soon. Mitsubishi Chemical has two crackers down at Kashima while JX Nippon's cracker at Kawasaki is also shut. Traders reported at the end of the week that up to 25,000 tons of olefins shipments for March had to be cancelled due to the shut crackers. The cracker shutdowns had led to lower naphtha prices over the week, however the energy outlook is mixed. Energy analysts expect that in the short term, crude oil demand will be dented as long as refineries remain offline while oil product prices are rising due to the restricted output from Japan. Japan is the third-largest crude importer in the world after the United States and China and is the largest importer of naphtha, according to the IEA. Energy analysts at private firm Argus said in a press release that there could be a net loss of 100,000 bpd of crude oil demand in the second quarter due to the shrinkage in Japan's GDP. Automotive production, electronics and white goods along with other industrial products have also experienced shutdowns. After the second quarter, however, there are expectations of an increase in demand for energy to offset the loss of nuclear power and other power generating facilities in Japan. This demand, however, will be tempered by the loss in the country's GDP. With expected power supply problems in the country, Japan's industries will have a hard time running at full rates. Going into the end of the year, energy analysts at Argus said that crude oil prices are likely to average higher than expected by the fourth quarter as Japan's GDP recovers and energy demand rises at a time when there were already concerns about oil supply. They forecast a net oil demand rise of over 250,000 bpd in the second half of 2011. As for polymer prices, PVC was the most affected by the events in Japan as expected. As noted on ChemOrbis, there had already been complaints in Southeast Asia about limited VCM supplies and with the shutdowns in Japan the situation was exacerbated. On the other hand, PE and PP prices were not affected as would normally be expected after such a disaster. This was due in large part to the excess supplies still being offered out of China to other regions of the world. As of Friday, offers out of China were still being reported.
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