FocusJAPAN DISASTER: Impact on Europe chemicals uncertain

25 March 2011 18:07  [Source: ICIS news]

By Tanzeel Akhtar

LONDON (ICIS)--The 11 March earthquake in Japan has left many petrochemical plants shut or running low but it is still too early to gauge the full impact on production output, export business and downstream demand, sources said on Friday.

Opinions have been mixed and uncertain.  

“Clearly it [the Japan earthquake] will have a short term impact on Japan and all ends of the markets are struggling, especially the automotive sector, said the European head of chemicals and pharmaceuticals at KPMG, Chris Stirling.

"Chemicals affected by the earthquake are those that go into cars, all the chemicals used for tyres, through to seatbelts and dashboards," he added.

“It is difficult to tell how things will pan out; it all depends on how severe the shutdowns are. The petrochemicals industry is a big supplier to the end market and demand is obviously going to fall.”

Honda Motor said on Thursday that it had extended its suspension on car production at its Japanese factories until at least 3 April, from 27 March, because it continues to face difficulties in acquiring parts from suppliers.

European demand for nylon 6,6 has fallen by up to 30% this week because of the impact of the Japanese disasters on automotive production. The crisis in Japan has heavily hit automotive vehicle and parts manufacture in the country and Europe is feeling the knock-on effect.

The European acrylic acid and acrylates market has also reacted to supply restrictions with prices for March moving up by €40–100/tonne ($57–143/tonne) from February.

But with very little acrylates cargo moving into Europe from Asia already due to firm domestic demand, it is thought that most likely the impact would not be as severe as previously feared.

“Product might be taken from Europe to Asia, thus shorting the European availability,” one downstream source said. The source added that, as there is no material coming into Europe from Asia, there had so far been no significant impact on European supply/demand dynamics.

Other sources have added that the Japanese disaster will only further fuel the tightness in Europe, as other key markets such as China are not prepared to take up Japan’s global export position.

In markets such as methanol where Japan is a significant importer, prices in Asia have started to move down.

Spot methyl ethyl ketone (MEK) prices in Asia shot up this week, however, by 22-24%, or $460/tonne (to $2,200-2,360/tonne CFR (cost and freight) NE (northeast) Asia due to the earthquake and tsunami.

Maruzen Petrochemical’s 170,000 tonne/year plant in Chiba, which is the largest in the region, has shut leading to a severe shortage of prompt cargoes.

“It is still too early to tell how this will affect the market," one producer said. "But with other products such as MEK and MIBK [methyl isobutyl ketone] where Japan is an exporter, we have already started to see prices move up.”

Click here for the latest news on the Japan disaster

By: Tanzeel Akhtar
+44 208 652 3214

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