Japan: Producers eye overseas investment

26 October 2012 08:46  [Source: ICB]

Japanese chemical companies are stepping up investment in overseas production of commodity petrochemicals. Domestic production is losing competitiveness - in large part because of the rising yen - while demand is growing much more quickly overseas, where economic growth is higher.


 Tapping into fast-growing economies is paramount for Japan's chemical industry as part of its plans to improve competitiveness

Copyright: Alamy

"While commodity grades account for the major portion of petrochemical products, their market is expanding with the growing world economy, as they have a wide range of applications," says the management of Sumitomo Chemical, which recently gave the green light to the Rabigh phase 2 project in Saudi Arabia. "Petro Rabigh is expected to become our petrochemical hub, given the availability of low-cost feedstock and excellent access to growing markets."

Sumitomo Chemical is the only Japanese chemical company that operates ethylene complexes outside Japan. After taking the lead in the construction of naphtha crackers in Singapore in 1982 and 1997, the company is building another petrochemical hub in Saudi Arabia together with Saudi Aramco, leveraging the world's most cost-competitive feedstock. The Rabigh phase 2 project involves the production of low density polyethylene (LDPE), ethylene vinyl acetate (EVA), ethylene propylene diene monomer (EPDM) rubber, polyolefins, methyl methacrylate (MMA), polymethyl methacrylate (PMMA) and polyol (a raw material for urethane), and is designed to upgrade Petro Rabigh's existing operations, which focus on the production of commodity derivatives.

Other Japanese chemical companies are strategically concentrating management resources on competitive derivatives, while globalising their production as a core part of their operations.

Asahi Kasei Chemicals is committed to becoming the world's leading manufacturer of acrylonitrile (ACN) and solution styrene butadiene rubber (S-SBR). It is ramping up ACN production in Thailand and South Korea, and negotiations to establish an ACN joint venture with SABIC in Saudi Arabia are nearing completion. As for S-SBR, a further 100,000 tonne/year of capacity will be added in Singapore, with the first 50,000 tonne/year due to start up in 2013, and later a further 100,000 tonne/year is planned in Asia, Middle East or North America.

Mitsubishi Rayon, which acquired Lucite International in 2009, is increasing methyl methacrylate (MMA) production in Japan and overseas. The company is the world leader in MMA and produces the monomer in Japan, South Korea, Thailand, China, Taiwan, Singapore, the US and the UK. It will start up a new joint-venture plant with SABIC in Saudi Arabia at the end of 2014. A 10,000 tonne/year plant for methacrylic acid (MAA) monomer is scheduled for start-up in Thailand in 2014.

Several companies have plans for China and other fast-growing emerging markets as part of overall efforts to remain competitive globally.

Mitsubishi Chemical plans to expand production of purified terephthalic acid (PTA) in China. It already has a PTA plant in India, which it started up with 470,000 tonne/year capacity in 2000, and later expanded by 800,000 tonne/year. It also has plants in Indonesia and South Korea, and one in China.

Mitsui Chemicals is looking at increasing production of phenolic products and polypropylene (PP) compounds for automotive applications. It will start a 250,000 tonne/year phenol plant early in 2014 in partnership with Sinopec, and is planning a 150,000 tonne/year bisphenol A (BPA) plant, although it is yet to make a formal decision on its construction.

Prime Polymer, a subsidiary of Mitsui Chemicals, built its eighth plant for PP compounds in Brazil, following those in Japan, the US, Mexico, Europe, Thailand, China and India. The producer took a 70% stake in a local Brazilian company to establish Produmaster Advanced Composites, and will expand in line with growing car production in the country.

Ube Industries is expanding caprolactam (capro), nylon 6 resins and butadiene rubber (BR) operations. It decided to sell 25% of its shares in Ube Chemicals (Asia) (UCHA), which produces and distributes capro and nylon resins in Thailand, to the PTT Group company IRPC in order to secure cost-competitive raw materials and expand capro and BR production in the future. In the second-phase expansion of capro production in Thailand, a new plant is scheduled for start-up in 2016 or later, possibly based on the phenol route. At the same time, the company plans to tie up with Malaysian petrochemical giant Titan Chemicals to increase BR production: a 50,000-70,000 tonne/year plant is due to come on stream as early as 2015 using feedstock from Titan Chemicals' naphtha crackers.


Sumitomo Chemical is building the Petro Rabigh hub in Saudi Arabia with Saudi Aramco

Japanese chemical companies' global strategies are based on efforts to select and specialise in specific commodity products and improve their competitiveness in their chosen areas - practices that have been around since the 1980s. They are most likely to expand investment in these products in North America, where the shale gas revolution is just beginning.

One example is Kuraray's investment in the US. A 40,000 tonne/year Poval polyvinyl alcohol resin plant will be built in Texas, with completion scheduled for September 2014. An expansion by 20,000 tonne/year will be implemented in 2016 or 2017 with an estimated investment of yen (Y) 20bn ($256m, €198m). This project will leverage low-cost feedstock from shale gas. The strategy is to produce Poval resin in Japan, Singapore, Europe and the US in order to ensure the supply of high-quality products as the world's leading manufacturer.

Asahi Kasei Chemicals is developing a next-generation butadiene (BD) extraction process and plans to build a 200,000 tonne/year plant using the new technology, probably in the US where low-cost feedstock is available. This project is closely associated with its strategy to become the world's leading S-SBR manufacturer.

The Chemical Daily provides online news and analysis relating to developments in Japan's chemical sector

Author: Masato Takanashi

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