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Japanese ethylene producers in trouble
Oct '10
Japan accounts for 15 percent of the worldwide ethylene output, but in current times, accounts for just 10 percent. The reasons are not far to seek. Although production capacities have remained stagnant in the past few years, domestic demand has plummeted from 5.7 million tons in 1999 -2000 to 5.3 million tons in 2008.

As per available statistics, there are 10 companies with around 15 plants involved in the production of ethylene and have been set up way back in the 50's and 60', which means they produce ethylene on obsolete machinery. Other than which, the raw material they consume; naphtha comes with a disadvantage.

On the other hand, South Korea currently has 11 ethylene production plants which are just 20-years old and churn out around 610,000 tons, while Saudi Arabia, has eight similar plants with yearly output of 850,000 tons.

In addition to weak domestic demand, ethylene producers also face the reality of more stringent emission limits, especially carbon dioxide. In Japan, the manufacturing sector accounts for about 36 percent of emissions, of which the chemical sector accounts for 20 percent, which means that, 7.5 percent of carbon dioxide emissions are from the chemical industry.

The President of Japan has pledged to undertake a 25 percent reduction of carbon dioxide emissions and take it to levels of the 1990's. Reducing carbon emissions will be the next big challenge for the chemical sector in the next 5-10 years and in the process will also have to bear a long-term burden.

In order to overcome the uncompetitive disadvantage of its domestic production facilities, Japanese petrochemical producers have started joint ventures and investing in other counties like Saudi Arabia to manufacture methanol, ethylene glycol, PE and PP. They have also invested in plants in China and India.

The biggest challenge that Japan's ethylene producers have faced is the closure of around 33 percent of downstream ethylene consuming units since the early 90's. Experts opine that a restructuring or consolidation is the only way out for these ethylene manufacturers.

They aver that, restructuring or rationalization does not mean optimization of individual plants, rather, the way out is to consolidate operations of different ethylene plants, which will lead to the number of Japanese ethylene manufacturers to fall from ten to five, the kind of which has been implemented in Chiba prefecture.

Fibre2fashion News Desk - India

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