UpdateJapan petchem exports to take hit due to quake, tsunami

14 March 2011 10:32  [Source: ICIS news]

(updates, adds details throughout)

By Pearl Bantillo and Judith Wang

SINGAPORE (ICIS)--Asia may have to cope with a lesser supply of petrochemicals from Japan as a number of facilities shut operations following last week’s massive quake and tsunami that struck the country, industry sources said on Monday.

Japan is facing its worst crisis since the Second World War, according to Prime Minister Naoto Kan, as the death toll from the twin catastrophes on Friday 11 March mounted, while it is working overtime to avert a nuclear disaster at its Fukushima plant.

Explosions occurred at the Fukushima Daiichi nuclear complex as cooling systems failed after the 9.0-magnitude quake and resulting tsunami. Meanwhile, strong aftershocks continued to rock Japan on Monday.

Japan’s benchmark stock market index - the Nikkei 225 - slumped to close 633.94 points lower or down 6.18% at 9,620.49 on Monday.

The country’s central bank had to pour in yen (Y) 7,000bn in liquidity to calm the market in early session. The Bank of Japan said the amount was the largest-ever same-day funds-supplying operation it had conducted.

“The bank will do its utmost to continue ensuring stability in the financial markets and securing smooth settlement of funds, including providing liquidity,” it said.

“The damage of the earthquake has been geographically widespread, and thus, for the time being, production is likely to decline and there is also concern that the sentiment of firms and households might deteriorate,” the bank said in a separate statement explaining its decision to further ease its monetary policy on Monday.

The bank said it had increased the cap of its asset purchase programme by Y5,000bn ($61.2bn) to Y40,000bn.

Shares in Japanese petrochemical producers were severely battered on Monday, as their operations were disrupted by the natural disasters.

Among them JX Holdings, the parent of JX Nippon Oil, shed 14.94%, Mitsubishi Chemical fell 10.37% and Mitsui Chemicals tumbled 11.15% at the close of trading.

JX Nippon Oil, Mitsui Chemicals and Mitsubishi Chemical halted operations at selected plants in Chiba prefecture, which is near the epicentre of the quake at Sendai in northeastern Japan.

“The earthquake in Japan will tighten the global petrochemical supply and push up prices as Japan is an important petrochemical producer in the world,” said Shenzhen-based Huatai United Securities in a research report.

Japan supplies petrochemical products such as ethylene, styrene monomer and paraxylene to China and South Korea.

Cosmo Oil’s 220,000 bbl/day refinery in Chiba was on fire after the earthquake. Shares of Cosmo Oil plummeted 21.63% on Monday.

Crackers near the quake’s epicentre, such as Maruzen Petrochemical’s 520,000 tonne/year unit in Chiba, and Mitsubishi Chemical’s 375,000 tonne/year unit and 453,000 tonne/year unit in Kashima, were shut.

Most other crackers at various locations in Japan were running at reduced rates, including Tonen’s 515,000 tonne/year cracker in Kawasaki, market sources said.

Operating petrochemical plants were expected to run at reduced rates due to a power crunch in Japan, Huatai United Securities said.

Meanwhile, concerns that Japan’s fuel demand would fall in the wake of the twin disasters weighed on crude prices, with US crude futures falling $2.23/bbl to $98.98/bbl as of 08:38 GMT.

But the dampening effect on fuel prices may be very temporary as Japan is likely to need to import more after a third of its refining capacity was affected by the quake, according to Shanghai-based Shenyin & Wanguo Securities.

Japan has 29 refineries which had a total capacity of 4.6m bbl/day as of January 2010, based on data from the US Energy Information Administration.

With additional reporting by Peh Soo Hwee, Felicia Loo, Nurluqman Suratman, James Dennis, Heng Hui, Chow Bee Lin and Junie Lin

($1 = €0.72, $1 = Y81.71)

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By: Pearl Bantillo
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