Slow Asian demand hits Japan petchem output

Slow Asian demand hits Japan petchem output

TOKYO (Reuter): Sluggish demand for petrochemical products in
Asia since the beginning of this year has forced Japanese
petrochemical manufacturers to keep production levels down,
petrochemical industry sources say.

"It doesn't make sense to make petrochemical products in order
to export (them) at loss-making prices, and consequently to put
downward pressure on the already weak Asian market," one
petrochemical trader said.

Some Japanese petrochemical firms started cutting production
earlier this year in an effort to cool down the bullish regional
naphtha market.

Although naphtha prices have declined by about 10 percent
since then, they intend to maintain their production cuts due to
poor petrochemical product prices in Asia.

"Our production levels may be temporarily high as the
Mizushima plant (in Okayama Prefecture, western Japan) has just
emerged from maintenance closure. But we will maintain our basic
policy of production cuts," a spokesman for Mitsubishi Chemical
Corp said.

Mitsubishi Chemical, Japan's largest petrochemical firm with
an annual ethylene production capacity of 1.45 million tons,
announced last December that it would cut its ethylene output by
10 percent starting from January 1997.

The profit margins of petrochemical product makers have been
squeezed as the prices of petrochemical products, which are
derived from naphtha, have fallen more sharply than those of
naphtha, partly due to waning buying interest from China.

Polypropylene prices have declined to $670 to $680 per ton c&f
(cost and freight) Hong Kong from $820 to $830 in January, and
polystyrene prices to $650 to $660 a ton from $750 in the same
period, traders said.

Idemitsu Petrochemical Co Ltd, which has been cutting
production of styrene monomer by 20 percent and that of
polystyrene by 25 percent since February, said it will maintain
the production cuts while carefully watching market prices.

Idemitsu has an polystyrene output capacity of 180,000 tons
per year.