FocusJapan crackers face heavy 2008 schedule

16 October 2007 08:59  [Source: ICIS news]

By Steve Tan

SINGAPORE (ICIS news)--Japan’s olefin supplies will tighten from late in the first quarter of 2008 as it undergoes at least seven naphtha cracker shutdowns, up from six this year, market sources said on Tuesday.

Asia’s largest olefins producer produces an estimated 7.7m tonnes/year of chemical building block ethylene from 15 of its crackers, which are mostly fed to downstream polymer and chemical plants.

The schedule next year could even be heavier as Mitsui Chemical’s 450,000 tonne/year Osaka cracker could also be shut down, based on recent information from a company source.

As the timing of the schedule dates are yet to be confirmed, the shutdown has not yet been included in the overall tally.

Out of the minimum of seven shutdowns, one will include expansion works.

Mitsubishi Chemical’s Mizushima cracker is said to be bringing online a new furnace which will add 150,000 tonnes/year capacity to the 496,000 tonne/year cracker.

The dates for the cracker shutdown, which could take a period of two weeks, have yet to be confirmed.

Japan last had a heavy turnaround schedule in 2006.

Eight crackers underwent over month-long turnarounds that year resulting in the country’s ethylene (C2) production falling 1% to 7.522m tonnes, the Japan Petrochemical Industry Association’s (JPCA) annual report shows.

That year, C2 spot had hit a high of $1,480/tonne CFR (cost and freight) NE (northeast) Asia during the peak summer month of August 2006 as tight supply and firm demand gave prices a firm boost.  

March, April and May are the traditional shutdown months in Japan, so domestic supplies would be tight this period next year, a source from Japanese trading house Marubeni Corp said.

He added that spot supplies could fall short in 2008 if the summer months are unusually hot.

“Japan’s export quantity has been decreased severely this year due to the hot summer period,” Yuha Kodaira, olefins trading manager with Marubeni Corp, said.

An unprecedented heatwave this summer shaved off a couple percentage points from operating rates at several of the older crackers in Japan and led to a severe shortage of export and domestic availability of molecules.

In terms of spot exports, the shutdown of Maruzen Petrochemical next year is expected to have the biggest impact on supply availability.

“Exports from Japan will be very limited (in 2008) especially with the shutdown of Maruzen,” a trader with one of the Japanese trading houses said.

Maruzen Petrochemical is scheduled to turn around its 520,000 tonne/year cracker between May-June next year during the peak summer months (see table), which could add to upward price pressure.

The other crackers slated for shutdown, such as Mitsubishi Chemicals, Idemitsu Kosan, and Tosoh Corp (see table), are not expected to have a significant impact on the spot markets as these producers are usually balanced in terms of supply.

Tosoh Corp - a net buyer of ethylene - is expanding its downstream vinyls production in 2008 thereby significantly increasing domestic demand, another Tokyo based olefins trader said.

Relief from tight supply could come from South Korea next year, which is only expected to have two cracker turnarounds in 2008 (KPIC and Lotte Daesan) as opposed to four this year.

South Korea is an active olefin trading partner with Japan, with cracker operators arranging swap cargoes between the two countries to help offset short supplies during heavy turnaround schedules.  

“On the other hand, the Korean shutdown schedule is very light, with only the Lotte Daesan shutdown having some impact on the market next year,” a Tokyo-based olefins trader said.

Export-oriented Lotte Daesan is expected to shut its 650,000 tonne/year cracker in May 2008 for expansion and turnaround works.

Despite the potential for another strong year in terms of prices, market players are more cautious about their forecasts due to the shifting demand supply balances compared to two years ago with the onset of new capacities in South Korea and Taiwan.

 

Name	Capacity tonne/year	Period - 2008
Idemitsu Kosan, Tokuyama	672,000	Sep-Oct
Maruzen Petrochemicals, Chiba	520,000	May-June
Mitsubishi Chemicals, Kashima 1	375,000	May-June
Mitsubishi Chemicals, Mizushima	496,000	TBC
Mitsui Chemicals, Osaka	450,000	TBC
Nippon Oil Corp., Kawasaki	440,000	Aug-Sep
Sanyo Petrochemical, Mizushima	470,000	Mar-Apr
Tosoh, Yokkaichi	527,000	Mar-Apr

By: Steve Tan
+65 6780 4359

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