Japan's chemical companies seek to expand overseas

21 October 2011 11:01  [Source: ICB]

Most of the investment projects being undertaken by Japan's chemical companies are located overseas, where the fast-growing Asian market and ready availability of cost-competitive raw materials promise an improvement in competitiveness and profitability. With a strengthening Yen and little growth potential in the domestic market, investment in Japan is limited to small-scale projects for high-performance products and business restructuring.


Mitsubishi Chemical Group, the largest chemical company in Japan, aims to "expand operations through partnerships with overseas leading companies," according to Yoshimitsu Kobayashi, president and CEO of Mitsubishi Chemical Holdings.

The company signed an agreement with China's Sinopec for a comprehensive partnership which is gearing up to open new plants for bisphenol A (BPA) and polycarbonate (PC) resins in Beijing in the fourth quarter of 2011. Other projects are under negotiation for implementation by the end of this fiscal year (ending March 31, 2012).

In Thailand, the company is building on its partnership with local industrial conglomerate PTT. The two are set to sign a joint venture agreement for bioplastic production.

Japan's Mitsubishi Rayon, now part of the Mitsubishi Chemical Group, plans to expand the production of methyl methacrylate (MMA), for which it boasts the world's largest market share. In Saudi Arabia, it will jointly build a new MMA plant with local petrochemical giant SABIC, adopting the ethylene-based Alpha process.

In China, Mitsubishi Rayon is planning a 100,000 tonne/year plant in Huizhou, China, to back up the Saudi investment. Demand for MMA is expected to increase rapidly for use in light guide plates for LED backlight LCD TVs and in car parts.


Petro Rabigh

Petro Rabigh: second phase will produce derivatives

Sumitomo Chemical
is working on the second phase of the Petro Rabigh project together with state oil company Saudi Aramco. Although it is lagging behind schedule because of the need to examine its feasibility, the final decision will likely be made by the end of this year.

With 3m tonnes/year of naphtha available, the plan is to produce derivatives including phenol, nylon, and LDPE (low density polyethylene)/EVA (ethylene vinyl acetate) copolymer.

Sumitomo Chemical positions its Chiba Works in Japan as its "mother" plant, its Singapore cracker operations as the production base for functional products and Saudi Arabia as the production base for commodity chemicals. It is stepping up investment in Singapore, where it plans to add production for solution polymerization styrene butadiene rubber and EVA.


Asahi Kasei is also focusing on solution polymerization styrene butadiene rubber and acrylonitrile (ACN), positioning these as core products. Its ACN project in Thailand, which is lagging behind schedule due to environmental problems, is expected to come on stream in the fourth quarter of this year, while a joint project with SABIC in Saudi Arabia is still being examined.

To meet growing demand for use in acrylonitrile-butadiene-styrene (ABS) resin, the company will open a new ACN production line at its Korean subsidiary Tongsuh Petrochemical. The joint project with SABIC is scheduled for completion in 2014 or 2015, and will mean capacity of 200,000 tonnes/year added almost every two years.

Asahi Kasei aims to capture one-half of the annual increase in the world's demand for ACN, which is estimated at 200,000 tonnes/year. As for solution polymerization styrene butadiene rubber, the second-phase expansion of 100,000 tonnes/year will be implemented in two stages - 50,000 tonnes/year in 2013 and 50,000 tonnes/year in 2015, with further expansion of 100,000 tonnes/year in mind in around 2017.

"Our goal," says Taketsugu Fujiwara, president and representative director of Asahi Kasei, "is to capture the largest share of the world market for ACN and [solution polymerization] SBR."


Mitsui Chemicals has decided to produce Evolue metallocene linear low density polyethylene (MLLDPE) in Singapore, and plans to build plants for phenol and bisphenol A (BPA) in China. The company is aiming to become the world's leading manufacturer of MLLDPE and phenolic products, according to Toshikazu Tanaka, president and CEO.

Likewise, Tosoh is set to expand polyvinyl chloride (PVC) production, and Ube Industries will expand caprolactam (capro) production, both in an effort to build a presence in the growing Asian market.


Downstream, Japan's specialty chemical companies are going global as their customers shift production overseas. In particular, manufacturers of paints and inks are expanding operations overseas to serve Japanese customers, and also to reach local manufacturers.

In emerging markets, demand for superabsorbent polymers (SAP), primarily for use in diapers, is growing as living standards improve. Agrochemical manufacturers are also tapping overseas markets, as food demand increases because of growing populations. In the meantime, the domestic market has little potential for growth because of low birthrates and an aging society.

Demand for SAP is growing at an annual rate of 30% in China and other emerging countries. Japanese manufacturers lead the SAP market. Nippon Shokubai is the world's largest SAP manufacturer, while San-Dia Polymers, a joint venture between Sanyo Chemical Industries, Mitsubishi Chemical Corp. and Sumitomo Seika Chemicals, is ranked among the top five in the world. Germany's Evonik, which is ranked second after Nippon Shokubai, and Germany's BASF, are also set to ramp up production.

Nippon Shokubai is leading the pack in terms of investment. It plans to open a 90,000 tonne/year plant in Indonesia by the end of 2013, with further expansion in Asia in mind.

Following a 70,000 tonne/year expansion in June 2011 at its Chinese subsidiary, San-Dia Polymers is also planning to build a new plant in southeast Asia, with start-up scheduled for 2014. Sumitomo Seika Chemicals, meanwhile, will implement a 27,000 tonne/year expansion at France-based chemical firm Arkema's Carling, France site, to which it outsources production, in the second quarter of 2013.


Ink manufacturers are also zeroing in on growing overseas markets. For example, DIC, the world's largest ink manufacturer, will open a plant for liquid inks in Chile for food/beverage packaging materials in the fourth quarter of 2011 through its US subsidiary Sun Chemical to serve growing markets in South America including Chile, Brazil and Argentina.

Its existing plant in Chile will be phased out over the period, but overall its production capacity in Chile will be increased by 40% by 2017. Toyo Ink SC Holdings will also ramp up production in Asia. A plant for photogravure inks will be built in India by the end of 2011 in addition to an existing one there for offset inks. This will be followed by another photogravure ink plant in Indonesia in 2012, and the company has plans in place to produce offset inks in Brazil to tap the South American market.

Sakata Inx also will build a plant for offset inks in India, more than doubling its production capacity in the second quarter of 2012. It is also looking at expanding production in Indonesia, Thailand, China and Vietnam to meet growing demand.

Demand for printing inks for newspapers and other publications is falling gradually in industrialized countries, where birthrates are declining and digital media is replacing print. Ink manufacturers are thus focusing on emerging countries, where demand for offset inks for newsprint and photogravure inks and liquid inks for food/beverage packaging materials is expected to increase.


Paint and coating manufacturers also are expanding operations abroad, while restructuring their domestic operations, which have little growth potential. For example, domestic leader Kansai Paint acquired South Africa's Freeworld Coatings, which has established a presence in the sub-Saharan market for construction paints.

Likewise, Nippon Paint and Dai Nippon Toryo have long been investing in overseas production to serve customers abroad. Plastic coatings producers are also going global as Japanese automakers and cell phone manufacturers shift production overseas. The result is that the result that the production of water-based paints and coatings is growing faster abroad than at home.

Author: Osamu Kano and Kazuhiro Kodama

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