Japan petrochemical plants losing competitiveness – Jefferies

20 January 2012 22:45  [Source: ICIS news]

HOUSTON (ICIS)--Petrochemical plants in Japan are showing signs of becoming less competitive in the international arena, an equity analyst with Jefferies & Co investment bank said on Friday.

“We believe this is not a short term issue,” said equity analyst Yoshihiro Azuma in a research note.

“Manufacturers [customers of Japanese chemical makers] are moving away from Japan to avoid negative FX [foreign exchange] impact,” according to the Jefferies research note.

Also, the appreciation of the yen is causing fixed costs of Japanese plants to get relatively heavier, the analyst said, while utility costs are relatively high.

“We expect investors will start to consider the potential shut down of naphtha crackers later this year,” the research note said. “If it actually happens, we must pay attention to companies that procure raw materials from naphtha cracker[s], such as synthetic rubber companies.”

The analyst added that demand in China was likely to “stay sluggish, especially construction materials, including PVC [polyvinyl chloride], and phenol derivatives, for a long time, given that the potential magnitude of a burst of the property bubble in China”.

Meanwhile, US petrochemical plants are getting more competitive, partly as a result of lower energy and feedstock costs stemming from shale gas developments, the research note said.

Also, for some materials such as toluene di-isocyanate (TDI), Europe is becoming more competitive.

“This is probably because German auto makers are getting more competitive. TDI is heavily used for auto components,” the research note said.

On Tuesday, BASF announced plans to invest around €1bn ($770m) in the construction of a 300,000 tonne/year single train TDI facility at its main Ludwigshafen site in Germany.

($1 = €0.77)

By: Brian Ford
+1 713 525 2653

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