Expansion in China hits Japan

Faced with growing competition from Chinese firms, Japanese chemical companies continue to close facilities, both in Japan and China.

In the most recent move, Mitsui Chemicals says it will shut down the phenol facility at its site in Ichihara, Japan, by 2026. Last year, Mitsui closed a purified terephthalic acid plant in Iwakuni, Japan, and a polypropylene line in Chiba, Japan. The company plans to downsize toluene diisocyanate production in Omuta, Japan, next year.

In addition, Mitsui and Idemitsu Kosan recently disclosed that they have begun discussions aimed at closing Idemitsu’s ethylene cracker in Chiba and consolidating production at Mitsui’s nearby cracker.

The closures are not limited to the petrochemical industry. Sanyo Chemical recently said it will shutter its fine chemical business in Nantong, China, which includes superabsorbent polymer production. And DIC recently announced its withdrawal from its liquid crystal materials business, which has facilities in Japan and China.

Masanori Kawakami, a chemical consultant based in Japan, says the country’s chemical industry is pressured on several fronts. “In an environment of deteriorating market conditions due to the current oversupply, the Japanese and Korean petrochemical industries are expected to be most affected by the competitive ethane-based US and Middle Eastern companies and the large expansion in China,” he says.

Meanwhile, Kawakami says, the superabsorbent polymer industry has been altered by Chinese firms’ large-scale expansion. “The oligopoly structure in which German and Japanese manufacturers held the market share has collapsed, and specialty has become commodity,” he says. The German firm Evonik Industries recently agreed to sell its superabsorbents business.

The companies themselves mostly blame China for the closures. Mitsui says it can’t continue operating the Ichihara phenol plant because of significant oversupply resulting from new facilities in China and other Asian countries and shrinking domestic demand. Similarly, Mitsui and Idemitsu said Japanese ethylene facilities are operating at low rates because large new petrochemical complexes, mainly in China, have diminished domestic ethylene demand.

A DIC spokesperson says the reason for the firm’s exit from the LCD materials business is that “competition with Chinese competitors has been intense, and profitability has deteriorated.”

Kawakami juxtaposes China’s massive expansion of both commodity and specialty chemicals with Japan’s chemical infrastructure, much of which is old and small scale. “There is no denying the possibility that some plants will be forced to consolidate, restructure, or suspend production in the future,” he says.