According to BMI’s new report, Japan’s petrochemicals industry will slowly turn the corner in 2014, following a period of volatility and decline. However, it does warn that the industry cannot count on domestic demand for growth, while in external markets it struggles with competitiveness in the context of high naphtha import costs and the expected onslaught of cheap product from North America.
Ethylene production has slowed with the lowest output levels seen in 20 years. Producer margins have been squeezed with the major players reporting much lower profits for the latest financial year. Polymer demand in Japan has languished, although producers have been able to pass on higher naphtha costs by hiking product prices, thereby protecting margins.
Fibre intermediates have been hard hit as have products further downstream such as methyl methacrylate (MMA). The slowing of growth in China and Japan’s persistent economic stagnation are to blame. The worst affected segment in 2013 was PP with output slumping by an estimated 8.4% year on year to 1.37 million t, while LDPE fell 7.2% to 1.37 million t and HDPE was down 0.9% to 920 000 t. However, PVC grew 9.9% to 1.93 million t.
There is however a bit of optimism. Indices indicated a move towards positive growth in H213 going into this year, with chemicals and plastic indices returning to growth, albeit at a low rate and insufficient to mark a fast rebound.
Lifting the industry
BMI have said that the domestic market will not be enough to lift the Japanese petrochemicals industry. Overall industrial growth will remain sluggish following the recessionary hit of 2008 while GDP growth will remain unimpressive yet steady. Looking at key end markets, the automotive industry will boost domestic production in relevant petrochemicals segments. A slightly better medium term scenario is envisaged for construction as pent up demand for residential housing secures growth in PVC consumption, but insufficient to bolster all PVC production. The general outlook is one of cautious and tenuous growth that can be easily outweighed by external shocks.
Adapted from a press release by Claira Lloyd.
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