Heavy olefins

Japan petchem producers urged to turn to ethane

Japan petchem producers urged to turn to ethane

Declining exports and demand signal that Japan's petchem sector is lagging behind its competitors, writes Nanami Oki Tokyo, 5 March (Argus) — Japan's petrochemical producers should convert their ethylene steam crackers to low-cost ethane rather than naphtha and LPG and should do so now before the challenges become impossible, refinery integration research association Ring says. Japan has a total cracking capacity of around 6.8mn t/yr, most of which is naphtha-fed with about 6.2mn t/yr of this coming with the flexibility to crack some degree of LPG, Argus data show (see table). Operators should turn to cheaper ethane imported from the US, Ring says, adding that it is concerned Japan's petrochemical sector is falling behind international competitors such as China , South Korea and Vietnam in a burgeoning feedstock transition to ethane. The country's petrochemical sector is already struggling from declining exports and domestic demand, pressured by regional oversupply driven by China. This has prompted Japanese firms to cut production of ethylene and other petrochemicals while focusing more on high-performance goods. But overseas competitors will catch up with Japanese technologies to generate these value-added products, so it is crucial to secure cheaper feedstock in the long term, Ring says. Switching to ethane-fed crackers could help domestic firms retain their competitiveness, with potential cost reductions of up to $400/t of ethylene output, Ring estimates. But the industry faces headwinds if it is to transition, the association says. One issue is that the companies do not have requisite funds for large-scale investments in switching to ethane that the associated infrastructure requires as a result of stagnant growth. Japanese producers with crackers — Mitsui Chemicals, Sumitomo Chemical, Mitsubishi Chemical, Tosoh and Resonac — have all posted lower profits from their basic petrochemicals divisions on shrinking margins in the past five years. The transition also requires infrastructure including storage facilities and ethane barges and ships to enable imports from the US, adding significant costs. Japanese firms are unlikely to have adequate infrastructure, let alone funding, to invest in such capacity and some, along with the country's authorities, have begun exploring converting existing facilities to alternative fuels such as hydrogen and ammonia to capitalise on anticipated growth in renewable fuels. Ring and Japan's economy, trade and industry ministry (Meti) have also expressed concern that a switch to ethane for cracking could create shortages in supplies of other basic petrochemicals other than ethylene because ethane feedstock yields mainly ethylene. Japanese companies have attempted to develop butadiene production from alternative feedstocks such as bioethanol and recycled oils for decarbonisation. But such technologies are at the early stages of development and their profitability remains hamstrung by high costs. Ring the changes Developing new propane dehydrogenation plants could help Japan prevent propylene shortfalls, but this is unlikely to be feasible given the levels of investment and acreage required at existing petrochemical complexes. The country's petrochemical producers could convert a proportion of their individual crackers to be fed with ethane in a flexible set-up instead of replacing the unit. Japanese crackers have many different components varying in age that will be difficult to replace under an ethane-only system, Ring says. It would also be preferable to diversify feedstocks for supply security, it says. Japan's ethylene production fell by 2.4pc on the year to 4.99mn t in 2024, the JPCA says, the lowest since its records began in 1999. Average cracker operating rates stood at 79.9pc last year, down by 0.9 percentage points from 2023, falling below 80pc for the first time since 2014 — when the first JPCA data on utilisation were available. Japan's petrochemical sector use of LPG fell by 13pc on the year to 1.39mn t in 2024, data from the Japan LPG Association show. NE Asia cracker cash margins Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.