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.