Recovery in domestic demand sustains increase in run rates at naphtha crackers in Japan

02-Apr-09

Domestic demand seems to be on the path to recovery in Japan, prompting cracker operators to increase run rates. As five key petrochem producers increase output, it is evident that the country’s naphtha cracking output is set to rise this month, after a gap of over 6 months. Japan’s crackers with almost 7.8 mln tpa of ethylene capacity are running at 75-80% capacity since Q4-08. Since August 2008, the petrochem sector has been on the decline, mainly on reduced exports that have persisted in recent months despite demand recovery in the region because of a relatively firmer yen. South Korean petrochem makers have upped capacity since the beginning of the month. Five South Korean naphtha crackers are currently operating at 95-100% capacity. As the won weakens making Korean imports, particularly into China, more attractive, and the subsequent improvement in demand could prompt South Korean petrochemical makers to run their plants at full throttle. This makes Japanese petrochemical makers the last to restore runs among the Northeast Asian players. Currently several producers have increased run rates to about 90%. These include Nippon Oil’s 404,000 tpa Kawasaki cracker, Sumitomo Chemical’s 380,000 tpa Chiba cracker, Showa Denko, Mitsui Chemicals and Maruzen Petrochemical.