Japan must keep grip on Mideast capacity - report

25 June 2008 09:50  [Source: ICIS news]

SINGAPORE (ICIS news)--Japanese petrochemical firms must continue to address the export impact of the expected new global capacity from the Middle East and southeast Asia, an analyst report said on Wednesday.

Expectations were that new olefin and derivative capacities in the two regions could reach more than 7.5m tonnes in 2008, said the Japan Integrated Chemical Industry Outlook report for June 2008 by Moody's.

Ethylene production capacity in SE Asia was projected to reach 7.85m tonnes/year in 2009, exceeding Japan’s total capacity of 7.5m tonnes/year, of which 30% is exported.

Demand for ethylene derivatives was expected to grow 6.7% and 12.8% a year in Asia and the Middle Eastern regions respectively.

However, ethylene supply was likely to continue to outstrip demand until 2009, the report said, adding that Japan’s ethylene exports might be adversely affected in response.

However, the report also highlighted that the domestic companies have already taken a variety of actions to improve the competitiveness of their ethylene complexes, such as converting  C2 production into propylene where greater growth potential lies.

Companies have also been pursuing the effective use of waste heat and steam through tie-ups with oil refineries and other petrochemical companies as well as shutting down some of their C2 derivatives operations.

The report also noted the efforts by companies to pursue growth opportunities in the overseas olefin derivatives markets such as Sumitomo's PetroRabigh project in Saudi Arabia that is expected to come on stream in the fourth quarter of 2008.

Major Japanese olefin derivative players include Asahi Kasei, Sumitomo and Mitsui Chemicals.

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By: Brian Myung
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