Japan Chemical Trading Blog

The latest chemical trading industry insights from Japan, Asia and the world, reported by the President of Daishin Corporation, Masa Oguchi.

Sumitomo Seika Chemicals to Build a New Factory in South Korea

On May 28, Sumitomo Seika Chemicals announced that it is going to construct a superabsorbent polymer (SAP) production facility (annual production capacity 59,000 tons) in Yeosu, South Korea, investing about 10 billion yen, operation to start in May 2016, their 4th SAP production base after Japan
(Himeji), Singapore and France.

SAP is a powder which pectizes water, saline, urine, blood or other liquid by absorbing fluid and is used to manufacture paper diapers, sanitary goods, etc. It can absorb hundreds times as much water as its own weight and syneresis is hardly caused even when pressure is applied.

Demand for SAP has been increasing year by year as paper diapers are becoming popular in emerging countries and demand for adult diapers is increasing in advanced countries where the population is aging.

Upon the operation commencement of the new factory in May, 2016, Sumitomo Seika Chemicals will have 386,000 tons of SAP annual production capacity.

Other SAP makers in Japan are Nippon Shokubai and San-Dia Polymers among others.

Sumitomo Seika Chemicals to Build a New Factory in South Korea

On May 28, Sumitomo Seika Chemicals announced that it is going to construct a superabsorbent polymer (SAP) production facility (annual production capacity 59,000 tons) in Yeosu, South Korea, investing about 10 billion yen, operation to start in May 2016, their 4th SAP production base after Japan
(Himeji), Singapore and France.

SAP is a powder which pectizes water, saline, urine, blood or other liquid by absorbing fluid and is used to manufacture paper diapers, sanitary goods, etc. It can absorb hundreds times as much water as its own weight and syneresis is hardly caused even when pressure is applied.

Demand for SAP has been increasing year by year as paper diapers are becoming popular in emerging countries and demand for adult diapers is increasing in advanced countries where the population is aging.

Upon the operation commencement of the new factory in May, 2016, Sumitomo Seika Chemicals will have 386,000 tons of SAP annual production capacity.

Other SAP makers in Japan are Nippon Shokubai and San-Dia Polymers among others.

Paraxylene Production Decrease

A Nikkei Newspaper article dated May 28th says that, “Price of paraxylene has dropped to USD1,200 to USD1,250 per ton and JX Nippon Oil and Energy, the top producer in Asia has further significantly decreased its production”.

While the production capacity reduction in March and April were 20% and 30% respectively, and from May, it has decreased by 50% partially due to regular plant repair.

Paraxylene is a clear and colorless liquid and a raw material of purified terephthalic acid (PTA), which is used for polyester fiber and PET resin.

Behind the significant production decrease, there is a severe condition of stagnant shipping due to an unsettled negotiation with heavy consumers in Asia.

The market of PTA, which is as a derivative of paraxylene, is suffering an excess in supply due to the recent increase in production capacity, and that is leading a sharp decrease in demand for paraxylene as its raw material.

I have heard this similar story before…

Paraxylene Production Decrease

A Nikkei Newspaper article dated May 28th says that, “Price of paraxylene has dropped to USD1,200 to USD1,250 per ton and JX Nippon Oil and Energy, the top producer in Asia has further significantly decreased its production”.

While the production capacity reduction in March and April were 20% and 30% respectively, and from May, it has decreased by 50% partially due to regular plant repair.

Paraxylene is a clear and colorless liquid and a raw material of purified terephthalic acid (PTA), which is used for polyester fiber and PET resin.

Behind the significant production decrease, there is a severe condition of stagnant shipping due to an unsettled negotiation with heavy consumers in Asia.

The market of PTA, which is as a derivative of paraxylene, is suffering an excess in supply due to the recent increase in production capacity, and that is leading a sharp decrease in demand for paraxylene as its raw material.

I have heard this similar story before…

Iron Ore Price Softening

Price of iron ore is in decline. Spot price for iron ore is now less than USD100 per ton — around 30% down from the beginning of this year.

The production of iron and steel has slowed down in China, the world’s largest iron ore consuming nation, due to the stagnation of economic growth in the country while production is increasing in Australia, the world’s top exporter.

The iron ore stock in China has reached a high level and according to Goldman Sachs, from this year to next year, an increase in excess supply is anticipated.

With the decline of the price, the focus should be on whether the high-cost producers in China will be able to continue to operate, and if major producers will revise their plans to expand the production that have already been announced.

Iron Ore Price Softening

Price of iron ore is in decline. Spot price for iron ore is now less than USD100 per ton — around 30% down from the beginning of this year.

The production of iron and steel has slowed down in China, the world’s largest iron ore consuming nation, due to the stagnation of economic growth in the country while production is increasing in Australia, the world’s top exporter.

The iron ore stock in China has reached a high level and according to Goldman Sachs, from this year to next year, an increase in excess supply is anticipated.

With the decline of the price, the focus should be on whether the high-cost producers in China will be able to continue to operate, and if major producers will revise their plans to expand the production that have already been announced.

Japan’s Output Gap Narrowed

On May 23, the Cabinet Office of Japan announced that the Output gap (GDP gap) in the Q1 of 2014 recorded -0.3%, reduced the negative value from -1.6% in the Q4 of 2013.

The output gap of Japan has been negative after the failure of the Lehman Brothers for 23 consecutive quarters from the Q3 of 2008. However, the negative gap has been the smallest in the past 23 quarters.

A negative output gap indicates that demand is not sufficient for domestic supply.

Although a significant reduction in the negative gap is a good trend, it may be merely because of the last-minute demand due to the consumption tax increase in April. I will continue to pay attention to the Q2 data this year.

The following table shows the transition in the output gap since the Q1 of 2008.

2008 Q1Q2Q3Q42009 Q1Q2Q3Q4
+1.8%+0.5%-0.7%-4.0%-8.0%-6.4%-6.5%-5.0%
[table “6” not found /]
[table “7” not found /]

Source: Website of Cabinet Office of Japan

 

Japan’s Output Gap Narrowed

On May 23, the Cabinet Office of Japan announced that the Output gap (GDP gap) in the Q1 of 2014 recorded -0.3%, reduced the negative value from -1.6% in the Q4 of 2013.

The output gap of Japan has been negative after the failure of the Lehman Brothers for 23 consecutive quarters from the Q3 of 2008. However, the negative gap has been the smallest in the past 23 quarters.

A negative output gap indicates that demand is not sufficient for domestic supply.

Although a significant reduction in the negative gap is a good trend, it may be merely because of the last-minute demand due to the consumption tax increase in April. I will continue to pay attention to the Q2 data this year.

The following table shows the transition in the output gap since the Q1 of 2008.

2008 Q1Q2Q3Q42009 Q1Q2Q3Q4
+1.8%+0.5%-0.7%-4.0%-8.0%-6.4%-6.5%-5.0%
[table “6” not found /]
[table “7” not found /]

Source: Website of Cabinet Office of Japan

 

Increase in U.S.-bound Container Cargoes

According to the announcement made by Japan Maritime Center on May 19th, during the first quarter of this year, Asia to U.S. container cargo volume increased by 4.8% year-on-year to 3.322 million TEU.

In March alone, the volume was 1.051 million TEU. Its breakdown was as follows:  0.636 million TEU from China, an increase by 25.9% year-on-year, 62,000 TEU from South Korea, an increase by 9.7%, and 59,000 TEU from Japan, an increase by 0.7%.

Although the freight is continuously showing a downward trend, according to a forwarder, it might have hit bottom at the moment and it is expected that the freight will increase gradually from now on. However, the expectation is not always reliable.

Since 2010, U.S.-bound cargo volume is growing every year. This might mean that the total shipping tonnage of container vessels is growing faster than that of cargo volume.

According to the Technical Note of National Institute for Land and Infrastructure Management (2012), the total shipping tonnage of container vessels has shown an approximate tenfold increase during the 20 years from 1990 to 2010.

Increase in U.S.-bound Container Cargoes

According to the announcement made by Japan Maritime Center on May 19th, during the first quarter of this year, Asia to U.S. container cargo volume increased by 4.8% year-on-year to 3.322 million TEU.

In March alone, the volume was 1.051 million TEU. Its breakdown was as follows:  0.636 million TEU from China, an increase by 25.9% year-on-year, 62,000 TEU from South Korea, an increase by 9.7%, and 59,000 TEU from Japan, an increase by 0.7%.

Although the freight is continuously showing a downward trend, according to a forwarder, it might have hit bottom at the moment and it is expected that the freight will increase gradually from now on. However, the expectation is not always reliable.

Since 2010, U.S.-bound cargo volume is growing every year. This might mean that the total shipping tonnage of container vessels is growing faster than that of cargo volume.

According to the Technical Note of National Institute for Land and Infrastructure Management (2012), the total shipping tonnage of container vessels has shown an approximate tenfold increase during the 20 years from 1990 to 2010.

Mitsui Chemicals Acquires Eyewear Lens Business from Corning

On May 20, Mitsui Chemicals announced “it had acquired the business rights, patents, and trademark rights of the eyewear photochromic lens material business from Corning, a major American glass manufacturer.”

With photochromic lens, photochromic materials knead into the lens changes its color shade in response to ultraviolet radiation. Recently, I started using glasses that incorporate this technology. They are very convenient as I can use them as an ordinary transparent pair of glasses indoors and as a pair of sunglasses outdoors.

I hope the company to develop a next-generation eyewear lens by combining the eyewear lens material technology in which the company already has strengths with the photochromic technology.

Among major Japanese chemical companies, Mitsui Chemicals has a tendency for attaching too much importance to the petrochemical industry. Therefore, I expect they will now expand their healthcare materials business.

Mitsui Chemicals Acquires Eyewear Lens Business from Corning

On May 20, Mitsui Chemicals announced “it had acquired the business rights, patents, and trademark rights of the eyewear photochromic lens material business from Corning, a major American glass manufacturer.”

With photochromic lens, photochromic materials knead into the lens changes its color shade in response to ultraviolet radiation. Recently, I started using glasses that incorporate this technology. They are very convenient as I can use them as an ordinary transparent pair of glasses indoors and as a pair of sunglasses outdoors.

I hope the company to develop a next-generation eyewear lens by combining the eyewear lens material technology in which the company already has strengths with the photochromic technology.

Among major Japanese chemical companies, Mitsui Chemicals has a tendency for attaching too much importance to the petrochemical industry. Therefore, I expect they will now expand their healthcare materials business.

Labor Shortage in Japan

Recently, I heard news that a major beef bowl chain had to close or shorten business hours of many of its restaurants due to labor shortages.

Not only the restaurant industry, but also other industries including construction, transportation, and pilot etc. have faced the same problem and there is too much news about the labor shortage to completely list here.

According to the labor force survey conducted by the Ministry of Health, Labour and Welfare of Japan, the work force has been on the decline after the peak around 2000. The number of young people between 15 years old and 29 years old have especially  been dramatically decreasing.

Although the increase in wages may be a positive factor for the Japanese economy that aims for a total recovery from deflation, downsizing of business activity due to labor shortages is a major negative factor.

While the government of Japan is expected to devise various measures including countermeasures against the falling birth rate and acceptance of foreign workers, Japanese companies need to implement effective measures to improve the productivity of each employee through enhancement of employee training and efficient introduction of IT and so on.

Labor Shortage in Japan

Recently, I heard news that a major beef bowl chain had to close or shorten business hours of many of its restaurants due to labor shortages.

Not only the restaurant industry, but also other industries including construction, transportation, and pilot etc. have faced the same problem and there is too much news about the labor shortage to completely list here.

According to the labor force survey conducted by the Ministry of Health, Labour and Welfare of Japan, the work force has been on the decline after the peak around 2000. The number of young people between 15 years old and 29 years old have especially  been dramatically decreasing.

Although the increase in wages may be a positive factor for the Japanese economy that aims for a total recovery from deflation, downsizing of business activity due to labor shortages is a major negative factor.

While the government of Japan is expected to devise various measures including countermeasures against the falling birth rate and acceptance of foreign workers, Japanese companies need to implement effective measures to improve the productivity of each employee through enhancement of employee training and efficient introduction of IT and so on.

Q1 Real GDP of Japan Grew by 5.9% in Annual Rate

On May 15, the Cabinet Office, Government of Japan announced that the real GDP in January-March grew 1.5 % from the previous quarter (October-December), showing a 5.9% increase at an annualized rate.

From the October-December 2012 period, positive growth from 6 consecutive quarters had been observed. This is because the consumer spending in Japan increased due to a last-minute surge in demands before an increase in the consumption tax rate on April 1.

No doubt that from April onwards a reactionary fall will cause a significant drop in consumer spending. The question is if the spending will be on the recovery after that, as the government forecasted.

These days, labor shortage and the raises in hourly wages of part-time workers have been actively discussed. They are good news for economic improvement.

Based on the Cabinet Office’s economic prospective for 2014,“The increase in the consumption tax rate will lead to the creation of sustainable finance, social security and to contribute to further public reassurance. Thus, it will become the basis for the continuously growing public consumption.”

However, the funds that the government has obtained must not be wasted by lavish spending to unnecessary things.

 

Q1 Real GDP of Japan Grew by 5.9% in Annual Rate

On May 15, the Cabinet Office, Government of Japan announced that the real GDP in January-March grew 1.5 % from the previous quarter (October-December), showing a 5.9% increase at an annualized rate.

From the October-December 2012 period, positive growth from 6 consecutive quarters had been observed. This is because the consumer spending in Japan increased due to a last-minute surge in demands before an increase in the consumption tax rate on April 1.

No doubt that from April onwards a reactionary fall will cause a significant drop in consumer spending. The question is if the spending will be on the recovery after that, as the government forecasted.

These days, labor shortage and the raises in hourly wages of part-time workers have been actively discussed. They are good news for economic improvement.

Based on the Cabinet Office’s economic prospective for 2014,“The increase in the consumption tax rate will lead to the creation of sustainable finance, social security and to contribute to further public reassurance. Thus, it will become the basis for the continuously growing public consumption.”

However, the funds that the government has obtained must not be wasted by lavish spending to unnecessary things.

 

Financial Results of Chemical Companies in Japan

All of the major 6 chemical companies recorded sales increases in the previous fiscal year ended March 31, 2014 compared with the second previous fiscal year. Sales and operating profit of each company are as follows:

 

 Shin-Etsu ChemicalAsahi Kasei Sumitomo ChemicalMitsubishi Chemical HDTosohMitsui Chemicals
Sales Q1 USD2.71BUSD4.30BUSD5.16BUSD7.81BUSD1.75BUSD3.63B
Sales Q2USD3.01BUSD4.89BUSD5.35BUSD8.30BUSD1.91BUSD3.69B
Sales Q3USD3.00BUSD4.71BUSD5.56BUSD8.70BUSD1.95BUSD3.77B
Sales Q4USD2.94BUSD5.08BUSD6.38BUSD10.17BUSD2.12BUSD4.57B
Sales Total USD11.66BUSD18.98BUSD22.44BUSD34.99BUSD7.72BUSD15.66B
Profit Q1USD455MUSD283MUSD246MUSD235MUSD66MUSD93M
Profit Q2USD466MUSD459MUSD217MUSD278MUSD116MUSD17M
Profit Q3USD427MUSD355MUSD249MUSD364MUSD106MUSD41M
Profit Q4USD388MUSD335MUSD296MUSD266MUSD126MUSD98M
Profit Total USD1,738MUSD1,433MUSD1,008MUSD1,104MUSD415MUSD249M

Sources: Website of each company

Remarks:

1) Calculated by using exchnage rate of USD1.00=JPY100
2) Profit is operating profit before interest and taxes.
3) Fisical Year from April 2013 to March 2014
Q1 = from April 2013 to June 2013
Q2 = from July 2013 to September 2013
Q3 = from October 2013 to December 2013
Q4 = from January 2014 to March 2014

Financial Results of Chemical Companies in Japan

All of the major 6 chemical companies recorded sales increases in the previous fiscal year ended March 31, 2014 compared with the second previous fiscal year. Sales and operating profit of each company are as follows:

 

 Shin-Etsu ChemicalAsahi Kasei Sumitomo ChemicalMitsubishi Chemical HDTosohMitsui Chemicals
Sales Q1 USD2.71BUSD4.30BUSD5.16BUSD7.81BUSD1.75BUSD3.63B
Sales Q2USD3.01BUSD4.89BUSD5.35BUSD8.30BUSD1.91BUSD3.69B
Sales Q3USD3.00BUSD4.71BUSD5.56BUSD8.70BUSD1.95BUSD3.77B
Sales Q4USD2.94BUSD5.08BUSD6.38BUSD10.17BUSD2.12BUSD4.57B
Sales Total USD11.66BUSD18.98BUSD22.44BUSD34.99BUSD7.72BUSD15.66B
Profit Q1USD455MUSD283MUSD246MUSD235MUSD66MUSD93M
Profit Q2USD466MUSD459MUSD217MUSD278MUSD116MUSD17M
Profit Q3USD427MUSD355MUSD249MUSD364MUSD106MUSD41M
Profit Q4USD388MUSD335MUSD296MUSD266MUSD126MUSD98M
Profit Total USD1,738MUSD1,433MUSD1,008MUSD1,104MUSD415MUSD249M

Sources: Website of each company

Remarks:

1) Calculated by using exchnage rate of USD1.00=JPY100
2) Profit is operating profit before interest and taxes.
3) Fisical Year from April 2013 to March 2014
Q1 = from April 2013 to June 2013
Q2 = from July 2013 to September 2013
Q3 = from October 2013 to December 2013
Q4 = from January 2014 to March 2014

Mitsubishi Chemical Holdings to Acquire Controlling Shares of Taiyo Nippon Sanso

According to the May 13 announcement of Mitsubishi Chemical Holdings, the company and Taiyo Nippon Sanso, one of the major industrial gas companies in Japan, agreed to make a tender offer for 51% shares of the latter by early November.

Mitsubishi Chemical Holdings is a comprehensive chemical and a holding company of Mitsubishi Group. The group also owns Mitsubishi Chemical, Mitsubishi Tanabe Pharma, Mitsubishi Plastics and Mitsubishi Rayon. It was established as a joint holding company of Mitsubishi Chemical and Mitsubishi Pharma in 2005.

The financial results for the previous fiscal year (April 2013 – March 2014) announced on May 12 showed a 13% sales increase from the second previous fiscal year (April 2012 – March 2013) to 3.5 trillion yen (approx. 35 billion dollar), and the operating profit of its core business increased 22% from the second previous fiscal year (April 2012 – March 2013) to 110 billion yen (approx. 1.1 billion dollars).

Taiyo Nippon Sanso is the largest industrial gas company in Japan, holding 40% of the domestic market share. It changed the trade name to the current one when Nippon Sanso and Taiyo Toyo Sanso merged in 2004. Taiyo Nippon Sanso especially outperforms in the semi-conductor business. The financial results for the previous fiscal year (April 2013 – March 2014) of the company announced on May 13 marked a 12% sales increase over the second previous fiscal year (April 2012 – March 2013) to 520 billion yen (approx. 5.2 billion dollar), and a 27% increase to 31.4 billion yen (approx. 314 million dollars) in the operating profit.

Though Mitsubishi Chemical Holdings is the largest chemical manufacturer in Japan, its president Mr. Kobayashi has a strong sense of crisis for the future of the petrochemical business and is hurrying on to restructure the business: he discontinued one of ethylene plants in Kashima Chemical Complex in early May.

Taiyo Nippon Sanso, aiming at the gas demand related to shale gas, which is expected to develop, has already installed many air separation plants in the U.S. Mitsubishi plans to construct a MMA plant using ethylene from shale gas in the U.S. and start the operation around 2017. Mitsubishi can acquire the nitrogen necessary to produce shale gas from Taiyo Nippon Sanso.

On the other hand, by coming under the control of Mitsubishi Chemical Holdings, which has capital strength, the unique businesses of Taiyo Nippon Sanso, such as MOCVD, will increase their opportunities to make a leap forward.

I expect a brilliant transformation of Mitsubishi Chemical Holdings like that of the former photographic film maker, Fujifilm.

Mitsubishi Chemical Holdings to Acquire Controlling Shares of Taiyo Nippon Sanso

According to the May 13 announcement of Mitsubishi Chemical Holdings, the company and Taiyo Nippon Sanso, one of the major industrial gas companies in Japan, agreed to make a tender offer for 51% shares of the latter by early November.

Mitsubishi Chemical Holdings is a comprehensive chemical and a holding company of Mitsubishi Group. The group also owns Mitsubishi Chemical, Mitsubishi Tanabe Pharma, Mitsubishi Plastics and Mitsubishi Rayon. It was established as a joint holding company of Mitsubishi Chemical and Mitsubishi Pharma in 2005.

The financial results for the previous fiscal year (April 2013 – March 2014) announced on May 12 showed a 13% sales increase from the second previous fiscal year (April 2012 – March 2013) to 3.5 trillion yen (approx. 35 billion dollar), and the operating profit of its core business increased 22% from the second previous fiscal year (April 2012 – March 2013) to 110 billion yen (approx. 1.1 billion dollars).

Taiyo Nippon Sanso is the largest industrial gas company in Japan, holding 40% of the domestic market share. It changed the trade name to the current one when Nippon Sanso and Taiyo Toyo Sanso merged in 2004. Taiyo Nippon Sanso especially outperforms in the semi-conductor business. The financial results for the previous fiscal year (April 2013 – March 2014) of the company announced on May 13 marked a 12% sales increase over the second previous fiscal year (April 2012 – March 2013) to 520 billion yen (approx. 5.2 billion dollar), and a 27% increase to 31.4 billion yen (approx. 314 million dollars) in the operating profit.

Though Mitsubishi Chemical Holdings is the largest chemical manufacturer in Japan, its president Mr. Kobayashi has a strong sense of crisis for the future of the petrochemical business and is hurrying on to restructure the business: he discontinued one of ethylene plants in Kashima Chemical Complex in early May.

Taiyo Nippon Sanso, aiming at the gas demand related to shale gas, which is expected to develop, has already installed many air separation plants in the U.S. Mitsubishi plans to construct a MMA plant using ethylene from shale gas in the U.S. and start the operation around 2017. Mitsubishi can acquire the nitrogen necessary to produce shale gas from Taiyo Nippon Sanso.

On the other hand, by coming under the control of Mitsubishi Chemical Holdings, which has capital strength, the unique businesses of Taiyo Nippon Sanso, such as MOCVD, will increase their opportunities to make a leap forward.

I expect a brilliant transformation of Mitsubishi Chemical Holdings like that of the former photographic film maker, Fujifilm.