Due to the global economic slowdown, continued weak demand in Asia, and rapid expansion of production capacity, Japan's basic chemical industry performed poorly from 2022 to the first half of 2023, resulting in a significant decline in production. According to the latest report released by the Japan Petrochemical Industry Association (JPCA) on June 5th, Japan's cracking plants were still forced to operate at low operating rates in the first half of 2023. If Asian demand cannot recover significantly in the second half of the year, the outlook for the Japanese petrochemical industry will remain bleak for the rest of this year.
In recent years, despite sluggish demand, Asia's petrochemical production capacity has grown rapidly. The mismatch between demand and production capacity has led to a decrease in the production of basic petrochemical products in Japan. According to the report of JPCA, Japan's ethylene production in 2022 will decline by 14.2% compared with the previous year, to the lowest level of 5.45 million tons in recent years, even lower than the level in 2020 when the COVID-19 epidemic was the most serious. Industry and government data show that compared to 2021, the production of 20 petrochemical products counted by JPCA shrank in 2022, with half of the production showing a double-digit decline. The largest decrease in ethylene glycol production was 34%; Next are 21% of styrene monomer and 19% of acrylonitrile butadiene styrene copolymer resin. In 2022, the annual production of five major plastics in Japan, including low-density polyethylene (LDPE), high-density polyethylene (HDPE), polypropylene (PP), polystyrene (PS), and polyvinyl chloride (PVC), decreased by 10.2% to 6.34 million tons.
The operating rate data is also not optimistic. At the 41st Asia Petrochemical Industry Conference held in mid May, Keiichi Iwata, president of JPCA and president of Sumitomo Chemical, said that due to weak demand, the average operating rate of Japanese petrochemical plants was about 80%. JPCA also stated that since August 2022, the operating rate of two domestic cracking units in Japan has been below 90%. To investigate the reason, JPCA stated: "Due to the severe global economic growth situation and the ongoing plans to put many new cracking plants into operation in the Asian region, the situation of oversupply of olefins will continue in the short term. In addition, low-cost ethylene goods from the United States are also flowing into Asia, forcing Japan's cracking plants to operate at lower operating rates
JPCA stated that the prospects for the country's petrochemical industry are worrying. JPCA predicts that Japan's domestic and export demand for benzene, toluene, and xylene will remain flat in 2023. Japan is a major exporter of aromatic hydrocarbons, but its total production of benzene, toluene, and xylene decreased by 5% to 9.44 million tons in 2022. For styrene monomers, Japanese manufacturers may adjust production as they expect global oversupply to continue, while for vinyl chloride monomers, domestic production in Japan is expected to remain unchanged. However, due to increased global demand for downstream polyvinyl chloride, exports are expected to start growing. According to the data of JPCA, due to the delay in recovery after the COVID-19 and the downturn of key downstream automobile and household appliance industries, Japan's styrene monomer export volume in 2022 will decline by 44% to 305000 tons; Production decreased by 21% to 1.54 million tons.
According to the International Monetary Fund, Japan's economic growth is expected to accelerate slightly to 1.3% this year after slowing to 1% in 2022. However, recently released official Japanese data shows that in the first quarter of 2023, the Japanese economy unexpectedly grew strongly by 2.7%, higher than the initial estimate of 1.6%. However, JPCA stated that for the rest of this year, the outlook for the Japanese economy remains largely uncertain and domestic demand is not reliable. Due to high inflation and a global economic slowdown, exports will be hit. The outlook for Japan's petrochemical industry will not be too optimistic in the important market of Asia, which is plagued by production capacity and demand.