Japan urges petrochem makers to reduce capacities to cope with falling domestic demand, growing imports

10-Nov-14

Japan has urged domestic petrochemical makers to voluntarily close or cut additional ethylene-making capacity to deal with falling local demand for plastics and synthetic fibres, and an influx of cheaper foreign supplies, as per Reuters. The push by the government amid existing plans to shut down ethylene plant, will lead to a further reduction in demand for naphtha. Mitsubishi Chemical has shut one of its ethylene plants in eastern Japan earlier this year, and Sumitomo Chemical and Asahi Kasei are to shut two more of the 14 remaining in 2015 and 2016. Even with the three shutdowns, the Ministry of Economy, Trade and Industry (METI) expects excess ethylene output capacity of 1.7 mln tpa by 2020. METI has twice ordered capacity cuts in Japan's refinery industry, which is beset with similarly bleak conditions. But the ministry doesn't intend to push for mandatory cuts at petrochemicals plants. Japan's ageing crackers, which split naphtha into ethylene and other plastics feedstocks, have also been struggling to compete with newer rivals in South Korea and Singapore with larger and more efficient plants. New capacity is also expected to come up in the United States and China, threatening to overwhelm petrochemical margins in Asia.In the United States, 11 mln tons of new ethane crackers are planned by 2020 to take advantage of cheap, abundant supplies derived from shale gas.