JAPAN DISASTER: Petchems chaos continues as nuclear fears grow

16 March 2011 17:54  [Source: ICIS news]

LONDON (ICIS)--Fears surrounding a nuclear meltdown and persistent aftershocks in Japan continued to cause disruption to petrochemicals on Wednesday, following the massive quake and tsunami that struck the country on 11 March.

The nuclear crisis escalated after explosions occurred at the Fukushima Daiichi complex, as cooling systems failed after the 9.0-magnitude quake and resulting tsunami. Meanwhile, strong aftershocks continue to shake Japan.

Engineers have been working frantically to pump seawater into nuclear reactors at the Fukushima plant in an effort to stabilise their temperatures and prevent a full-scale meltdown. The first in a series of explosions occurred at the plant on Saturday 12 March.

In its latest report, the International Atomic Energy Agency (IAEA) said that the Japanese authorities have reported concerns about the condition of the spent nuclear fuel pool at Fukushima Daiichi's Unit 3 and Unit 4.

“Japanese Defence Minister Toshimi Kitazawa announced Wednesday that Special Defence Forces helicopters planned to drop water onto Unit 3, and officials are also preparing to spray water into Unit 4 from ground positions, and possibly later into Unit 3,” it said.

Japan’s Emperor Akihito has said he was deeply worried about the crisis the country is facing.

Many refineries and petrochemical plants in the region have been forced to shut since last Friday, in turn causing a domestic shortfall in fuel, power and feedstocks.

As a result, Japan is seeking prompt supplies of fuel to run its power plants and plug a severe domestic shortfall, after about 22% of its refining capacity was shut down in the aftermath of the earthquake. Energy giant JX Group has terminated exports of oil products to cater to domestic demand, while operations at most oil terminals in northeastern Japan are shut down.

Japan’s Shin-Etsu shut its 550,000 tonne/year polyvinyl chloride (PVC) plant at Kashima after the earthquake, and this is expected to strain PVC supply from the country. Japan Polyethylene’s polyethylene (PE) plants at Kashima and Kawasaki are also down.

Asahi Glass Co (AGC) shut its caustic soda plants at Chiba and Kashima after they were damaged in the earthquake, while Japan Polypropylene’s production site at Kashima was badly affected by the tsunami that followed.

In addition, Kashima Chemical has shut its two epichlorohydrin (ECH) units at Kashima, Keiyo Monomer’s 200,000 tonne/year vinyl chloride monomer (VCM) facility at Chiba remains down following the earthquake, and two of six monoethylene glycol (MEG) plants in Japan are not operating.

Meanwhile, Japanese producers might have to declare force majeure (FM) on caprolactam (capro) due to possible feedstock and power shortages, which has sparked panic buying of spot capro by downstream nylon makers in Taiwan, sources said.

Logistical problems and fuel issues are also hindering the delivery of petrochemicals across Japan. Access to the most badly hit areas in northern Japan was either limited or completely cut off as roads were damaged, and land transport in other parts of the country was becoming increasingly difficult as a result of fuel shortages.

As imports from Japan have been disrupted, analysts said that China’s petrochemical prices may also rise with feedstock costs.

In addition, Japan's giant automakers, including Toyota, Honda, Nissan, Suzuki and Mitsubishi, have halted production at their local plants for up to a week through 20 March on the back of safety concerns and power outages. The move is expected to lead to a fall in Asian styrene butadiene rubber (SBR) prices - a major raw material used in the production of tyres - in the short term.

On a positive note, shares of major Japanese companies rebounded on Wednesday, recapturing losses in the previous day that had been spurred by the escalating nuclear crisis.

According to media reports, the latest official death toll from the quake and tsunami is more than 4,000, but thousands are still unaccounted for and it is estimated that more than 10,000 have been killed.

Additional reporting by Feliana Widjaja, Chow Bee Lin, Nurluqman Suratman, Helen Yan, James Dennis, Felicia Loo, Becky Zhang, Lester Teo, Pearl Bantillo, Judith Wang, Junie Lin and Helen Lee

Click here for latest news on the Japan disaster

By: Franco Capaldo
+44 (0)20 8652 3214

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