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Soaring naphtha prices pulls down chemical production
01
Aug '08
Chemical manufacturers in Japan are cutting back on their regular production as profit margins continue to get squeezed due to spiraling prices of naphtha, a key raw material for petrochemical products.

As such, leading industry player, Mitsubishi Chemical Corp (MCC), has also decided to delay the launch of operation at its new polycarbonate resin plant in Kitakyushu, Fukuoka Prefecture, southwestern Japan.

Initially scheduled to start operating by this month, this plant, which has an annual capacity of 60,000 tons, will only commence production in November. But even then the precise date will depend upon the market conditions.

Moreover, Mitsui Chemicals Inc, has closed one of its three production lines at its high-purity terephthalic acid plant in Waki, Yamaguchi Prefecture, western Japan. Besides, one of the remaining two lines is also under suspension.

As a consequence, overall annual output capacity of the plant has dropped by 50 percent to touch 400,000 tons.

Experts have reasoned out that a cut in chemical production has been brought about largely because manufacturers have failed to fully pass on higher cost of raw materials to their products. The situation has worsened to such an extent that producers may have to contemplate further cut in output if the demand continues to fall because of other factors like a slowdown in US economy.

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