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Plant closures proliferate in Japan

Shutdown of unprofitable facilities reflects a new mentality at Japanese chemical companies

by Katsumori Matsuoka, special to C&EN
September 21, 2021 | A version of this story appeared in Volume 99, Issue 35

An aerial photo of a chemical plant.
Credit: Sumitomo Chemical
Sumitomo Chemical will end EPDM production at this site in Chiba, Japan.

Japanese chemical companies have a reputation for keeping facilities in their home country running long past their primes, but a series of recent plant shutdown announcements indicates that firms are starting to manage their businesses with a sharper eye on profits.

Sumitomo Chemical announced earlier this month that it will close a plant making ethylene-propylene-diene monomer (EPDM) rubber in Chiba, Japan, by March 2023. The firm says it has tried to enhance the competitiveness of its EPDM business but that the cost of maintaining and repairing the 50-year-old facility is rising year by year.

Nissan Chemical says its melamine production process was unique when it opened its factory in Toyama, Japan, in 1964. Today, though, global capacity for the product exceeds demand by a large margin, the company says, to the detriment of profitability. Nissan says it will end production of melamine in June 2022 and make derivatives such as melamine cyanurate by purchasing melamine feedstock.

Similarly, Asahi Kasei says it will stop producing styrenic block copolymers in Kawasaki, Japan, in March 2023. The company opened the plant in 1982.

Mikiya Yamada, a stock analyst at Mizuho Securities, says the shutdown decisions reflect a new, hard-nosed attitude at Japanese chemical companies. Whereas managers historically felt a responsibility to continue supplying customers, regardless of business performance, today they are increasingly deciding that “they don’t produce unprofitable items.”

He predicts that “many more similar moves will come to the fore,” especially because companies often have other, more lucrative businesses that are doing well. “They can take such steps because they have earned high profits,” Yamada says.

Yamada warns that this change in investment policy will be felt among downstream customers, who to date have been able to buy quality chemicals and polymers from Japan at low prices. “It is likely to be hard for users of chemical products to obtain, at low costs, materials complying with their quality standards,” he says.

While the new policies may come as a shock to buyers, Yamada says the end result should be a healthier commodity chemical market in Japan.



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