Japan to shut three naphtha crackers from 2014 to 2016 to curb naphtha imports as supply grows

09-May-14

Japan plans to shut three naphtha crackers from 2014 to 2016. Oil-based naphtha can be used to make ethylene. As per Reuters, about 1.3 mln tons of ethylene capacity, around a sixth of Japan's total, will be permanently closed over the next two years amid a broad fall in sales of cars and other goods as the country's population dwindles. Japanese domestic demand is part of the reason for cracker closures, but the bigger issues are high costs and a lack of competitiveness, as per an analyst. Fading demand in Japan would come against a background of growing naphtha supplies from the Middle East and parts of Asia. Mitsubishi Chemical will permanently shut its 392,000 tpa cracker owned in east Japan in May, followed by Sumitomo Chemical’s 415,000 tpa cracker in Chiba in May 2015, and then Asahi Kasei’s 504,000 tpa cracker around April 2016. The country's total naphtha consumption in the year ended March was around 31 mln tons, trade ministry data showed, with imports making up close to 60% of that. The impact of higher supplies will be felt from 2015, after cracker shutdowns announced by petrochemical firms gather momentum. A surge in supply on expansion in the Middle East, Singapore, South Korea and shale gas development in USA could rein in prices that, for now, are expected to stay strong for a third year on demand from China.