APIC ’24: Overcapacity weighs on Japan petrochemical production – JPCA

SINGAPORE/SEOUL (ICIS)–Cracker operations in Japan will remain “challenging” this year amid soft demand while capacity expansion in China continues, according to the Japan Petrochemical Industry Association (JPCA).

• C2 output falls to record low in 2023
• Production of five major plastics shrink by around 5%
• Capacity optimization among industry main tasks

“With new cracker capacities being planned in China almost every year at a pace far exceeding demand, the operation rates of domestic crackers are expected to remain challenging,” said a JPCA report prepared for the Asia Petrochemical Industry Conference (APIC) being held in Seoul.

The two-day conference ends on 31 May.

In 2023, Japan’s ethylene (C2) production shrank 2.3% to a record low of 5.32 million tonnes, as domestic crackers ran below full capacity, JPCA data showed.

“The operation rates of domestic crackers have remained below 90% (this rate is said to be the criterion for judging the economic situation) since August 2022 and the monthly operation rate dropped below 80% four times in 2023,” JPCA said.

Japan, which was dislodged by Germany as the world’s third-biggest economy in 2023, is projected to post a 2024 GDP growth of around 1.3%, down from last year’s 1.9% pace. In Q1 2024, the economy shrank at an annualised rate of 2.0% as both consumption and capital spending weakened.

For the whole of 2023, the country’s total production of five major plastics – namely, linear density polyethylene (PE), high density PE (HDPE), polypropylene (PP), polystyrene (PS) and polyvinyl chloride (PVC) – declined by an average of 4.7% to 6.02 million tonnes.

Japan production of major petrochemicals (in thousand tonnes)

Product	2023	2022	% change
Ethylene	5,324	5,449	-2.3
LDPE	1,223	1,347	-9.2
HDPE	661	714	-7.4
PP	2,075	2,120	-2.1
PS	564	654	-13.8
PVC	1,496	1,483	0.9
Styrene monomer (SM)	1,428	1,542	-7.4
Ethylene glycol (EG)	264	351	-24.8
Acrylonitrile (ACN)	341	422	-19.2

Sources: JPCA, Japan’s Ministry of Economy, Trade and Industry (METI), Japan Styrene Industry Association (PS, SM) and Vinyl Environmental Council (PVC)

Domestic demand as ethylene equivalent for the year declined by 11.9% to 3.87 million tonnes, according to JPCA data.

“In 2024, there is a risk of a decline in demand due to the deterioration of the global economy, such as price hikes of raw commodities due to supply disruptions caused by several problems,” JPCA said, citing Russia’s prolonged invasion of Ukraine, the Israel-Hamas war, and attacks on commercial ships in the Red Sea.

“But a certain amount of demand growth is expected due to the resilience of the US and some developing countries’ economy, and the global economy would have a possibility to make a ‘soft landing’,” JPCA stated.

Economists are growing more confident that the US – the world’s biggest economy – will be able to post a 2024 growth rate of 2.4%, easing from the actual GDP growth of 2.5% in 2023.

China, although beset by a slumping property sector, should be able to post a 5.0% GDP growth, according to the revised forecast by the International Monetary Fund (IMF).

In the report, JPCA also emphasized the petrochemical industry’s tasks to engage in “green” or environmental-friendly transformation toward carbon neutrality by 2050; to enhance and optimize excess production capacity amid a declining population; to push for digital transformation; and contribute to a recycling-oriented society.

“In Japan, demonstration experiments using new process technologies and raw materials that contribute to green activities have begun, such as biomass-based fuel, bio-material-based olefins, ammonia synthesis, and hydrocarbon synthesis,” it said.

Focus article by Pearl Bantillo