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Feedstock competition may drive Japan's chemical industry to niche products

By: Gurdip Singh

September 13, 2013

SINGAPORE — Japan's chemical industry faces a tough feedstock competition and will have to intensify its focus on specialty and niche products, both for the domestic and export markets, say industry official at an industry conference in Singapore.

U.S. shale gas and oil, an eventual feedstock source for American petrochemicals, are a major threat to the Japanese chemicals industry, said Yasushi Nawa, managing director and CEO at Mitsui Chemicals Asia Pacific Ltd. in Singapore.

Methane hydrates — solid methane-rich compounds found under sediment in the deep ocean floor, are a "feedstock substitute hope" for the globally-challenged Japanese chemical industries. But experts say methane hydrate feedstocks may take decades to develop, and the eventual cost is still unpredictable.

Industry observers commended the premium quality of Japanese specialty chemical products, saying these were well respected in the developed Western markets. But there was a legitimate fear of being challenged by similar products produced by the revived American petrochemicals sector and the emergence of ambitious Chinese producers backed by Western technology.

The U.S. shale oil and gas resources are good for another 100 years of supplies. Their development has initiated the rebirth of the U.S. petrochemicals sector, said Balaji Singh, president of Houston-based CMR Inc. and organizer of the Singapore conference, "Global Polyolefins in Transition," held Sept. 11-13.

The Japanese know that the Chinese have much more shale gas and oil resources that the United States, and the Chinese's renowned ambition of mass production, using cheap resources, would re-write all market economics for specialty chemicals.

But Mitsui's Nawa still felt the Japanese were confident of working their way out through niche-product diversifications and research and development on new products. He added that opportunities still exist in the health care, sanitary care and food safety care segments.

He highlighted Mitsui's US$2 billion investments in semi-finished and finished product plants in Southeast Asia and China since 2000. Nawa said Mitsui is set to commercialize its latest investment of US$200 million in Singapore, including a 772 million-pounds-per-year polyethylene plant at Singapore's petrochemical hub on Jurong island, which will start production in January 2015.

Also, Mitsui is a 20 percent partner in a 661million-pound-per-year metallocene polymer plant on Jurong island. The plant, in partnership with Japan's Prime Polymer Co. Ltd., is scheduled to start production in the second quarter of 2015.

Mitsui, he said, was not taking any high-risk of investing in upstream facilities, such as naphtha plant. The company is comfortable to be aligned with third-party sourcing for feedstocks.