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.

Rare Metal Prices Fall

Crude oil, natural gas, grain, coal, iron ore, base metal, precious metal,
real estate, dairy, charge at a hostess bar in Osaka Shinchi … prices on
anything and everything have been falling due to the worldwide recession;
the price falls for rare metals are devastating as well. Today, I would like
to look at the falling prices of the rare metals in which we trade.

In retrospect, prices of resources have greatly increased from about 10
years ago owing to the expanding demand in China. Crude steel production is
one of the indexes that shows how the world has changed in the last 10 to 15
years. Crude steel production in the world has doubled from around 2000 as
China rapidly increased production (about 800 million tons in 2000 to 1,600
million tons in 2014). Is the current amount of crude steel production
adequate when considering the current world population and its rate of
increase in future? If it is a more than adequate quantity, it must be a
“bubble” and will adjust over time.
In the meanwhile, the prices of base metals such as copper and crude oil
have also significantly increased. The prices of rare metals have increased
as well, reflecting China’s increasing demands in the last 10 years.
Especially, rare metals are prone to be an object of speculation and
price-fixing so that the prices of many of them increased about 5 or 10
times than those of a dozen years ago. Their declining pace is sharp, too.
Dealers who sell inventory cannot avoid selling them at prices lower than
the cost.

Let’s take a look at the recent situation of several rare metals:

. Bismuth
Its price was more than USD12 per pound a year ago. The price dropped to
around USD5 now. Metal Bulletin on September 11 said the price had slightly
recovered from USD4.8 to USD4.9. Almost all of the raw materials of bismuth,
produced as a byproduct during lead mineral processing, come from China, and
its offering prices to Japan have bounced back somewhat lately. Bismuth is
used as an additive for free-cutting steel, or in electronic component
materials for condensers and medicines. Since the demand for industrial use
has generally eased, we need to watch carefully to know whether the current
increase in price is a technical rally or an initial stage of full-scale
inversion.

. Selenium
Its price was more than USD23 per pound a year ago. The price has now
dropped to around USD10. Selenium is traditionally used in glass coloring,
electronic component material, feed, agriculture and pigment, but its usage
as an electrolytic manganese additive increased mainly in China about 10
years ago. Accordingly, the prices, at a point, tentatively increased more
than 10 times from the former USD5 or so. The prices have dropped to below a
half in the last 6 months due to poor demand in the manganese industry in
China. Will the price go back to the levels before the demand increased from
the manganese industry, which exceeded 40% of the total demand of selenium
at the peak?

. Tellurium
Its price was more than USD100 per kilogram 6 months ago. The price has now
dropped below USD50. We expected that the demand for cadmium telluride for
thin-film solar panels would increase, and actually its price was as high as
USD400 in 2011, but 4 years later, its price became about one-tenth of that.
Tellurium is used for Peltier devices, free-cutting steel additives and
rubber chemical along with solar panels.

. Indium
Its price was around USD700 per kilogram a year ago. The price has now
dropped to around USD300. Indium is produced as a byproduct of zinc and used
for transparent electrodes for liquid crystal panels. The price has
continued to fall recently as people are aware of the risk, such as
inventory release by the rare metal exchange in China, the Fanya Metal
Exchange, which I will mention later.

More than 10 rare metals are traded on the Fanya Metal Exchange (Kunming
City in Yunnan Province). According to their website, Fanya Metal Exchange
stores indium at a volume equal to global demand for 3 to 4 years at
designated warehouses, and it had a peculiar presence. However, information
from Chinese trading companies stated that transactions of the main rare
metals such as indium, bismuth and germanium have been suspended since July
this year after an audit by the local authorities at the end of last year.
Some investors had a demonstration to ask for an investigation by the
authorities. It is rumored that an executive of the Exchange had tried to
escape to Canada and was detained by the authorities. Anyway, private
investors who are said to be 70% of all the investors of the Exchange have
held latent losses because further transactions cannot be made for a long
time. It faces growing risks, such as inventory release. However, hearing
such a rumor, we may begin to doubt whether the Exchange has ever had
adequate quality stock in its designated warehouses.

Since the Tulip mania in Holland in 1637, many “bubbles” were created and
burst in the world. How will this rare metal “bubble” be concluded?
In the Tulip mania, once the tulip bulb price reached an incredibly high
level over several years, one day, suddenly, there were no purchasers. Then
the price fell to less than one-hundredth its original level.

Rare Metal Prices Fall

Crude oil, natural gas, grain, coal, iron ore, base metal, precious metal,
real estate, dairy, charge at a hostess bar in Osaka Shinchi … prices on
anything and everything have been falling due to the worldwide recession;
the price falls for rare metals are devastating as well. Today, I would like
to look at the falling prices of the rare metals in which we trade.

In retrospect, prices of resources have greatly increased from about 10
years ago owing to the expanding demand in China. Crude steel production is
one of the indexes that shows how the world has changed in the last 10 to 15
years. Crude steel production in the world has doubled from around 2000 as
China rapidly increased production (about 800 million tons in 2000 to 1,600
million tons in 2014). Is the current amount of crude steel production
adequate when considering the current world population and its rate of
increase in future? If it is a more than adequate quantity, it must be a
“bubble” and will adjust over time.
In the meanwhile, the prices of base metals such as copper and crude oil
have also significantly increased. The prices of rare metals have increased
as well, reflecting China’s increasing demands in the last 10 years.
Especially, rare metals are prone to be an object of speculation and
price-fixing so that the prices of many of them increased about 5 or 10
times than those of a dozen years ago. Their declining pace is sharp, too.
Dealers who sell inventory cannot avoid selling them at prices lower than
the cost.

Let’s take a look at the recent situation of several rare metals:

. Bismuth
Its price was more than USD12 per pound a year ago. The price dropped to
around USD5 now. Metal Bulletin on September 11 said the price had slightly
recovered from USD4.8 to USD4.9. Almost all of the raw materials of bismuth,
produced as a byproduct during lead mineral processing, come from China, and
its offering prices to Japan have bounced back somewhat lately. Bismuth is
used as an additive for free-cutting steel, or in electronic component
materials for condensers and medicines. Since the demand for industrial use
has generally eased, we need to watch carefully to know whether the current
increase in price is a technical rally or an initial stage of full-scale
inversion.

. Selenium
Its price was more than USD23 per pound a year ago. The price has now
dropped to around USD10. Selenium is traditionally used in glass coloring,
electronic component material, feed, agriculture and pigment, but its usage
as an electrolytic manganese additive increased mainly in China about 10
years ago. Accordingly, the prices, at a point, tentatively increased more
than 10 times from the former USD5 or so. The prices have dropped to below a
half in the last 6 months due to poor demand in the manganese industry in
China. Will the price go back to the levels before the demand increased from
the manganese industry, which exceeded 40% of the total demand of selenium
at the peak?

. Tellurium
Its price was more than USD100 per kilogram 6 months ago. The price has now
dropped below USD50. We expected that the demand for cadmium telluride for
thin-film solar panels would increase, and actually its price was as high as
USD400 in 2011, but 4 years later, its price became about one-tenth of that.
Tellurium is used for Peltier devices, free-cutting steel additives and
rubber chemical along with solar panels.

. Indium
Its price was around USD700 per kilogram a year ago. The price has now
dropped to around USD300. Indium is produced as a byproduct of zinc and used
for transparent electrodes for liquid crystal panels. The price has
continued to fall recently as people are aware of the risk, such as
inventory release by the rare metal exchange in China, the Fanya Metal
Exchange, which I will mention later.

More than 10 rare metals are traded on the Fanya Metal Exchange (Kunming
City in Yunnan Province). According to their website, Fanya Metal Exchange
stores indium at a volume equal to global demand for 3 to 4 years at
designated warehouses, and it had a peculiar presence. However, information
from Chinese trading companies stated that transactions of the main rare
metals such as indium, bismuth and germanium have been suspended since July
this year after an audit by the local authorities at the end of last year.
Some investors had a demonstration to ask for an investigation by the
authorities. It is rumored that an executive of the Exchange had tried to
escape to Canada and was detained by the authorities. Anyway, private
investors who are said to be 70% of all the investors of the Exchange have
held latent losses because further transactions cannot be made for a long
time. It faces growing risks, such as inventory release. However, hearing
such a rumor, we may begin to doubt whether the Exchange has ever had
adequate quality stock in its designated warehouses.

Since the Tulip mania in Holland in 1637, many “bubbles” were created and
burst in the world. How will this rare metal “bubble” be concluded?
In the Tulip mania, once the tulip bulb price reached an incredibly high
level over several years, one day, suddenly, there were no purchasers. Then
the price fell to less than one-hundredth its original level.

The Benzene Price Continues its Substantial Fall

Benzene is a basic petrochemical used as a raw material for resins and adhesives, and JX Nippon Oil and Energy Corporation is the Asian price leader.

According to the company’s news release on January 5th, the price for Asia in January was USD 655 per ton, more than 25 percent lower than the previous month’s price of USD 885 per ton.
It’s a substantial fall, continuing from the previous month, and the lowest price since just after the bankruptcy of Lehman Brothers in June 2009.

The background is considered to be the weak demand for resin raw materials, such as styrene monomer and phenol made from benzene; however, we can conclude that the fall follows the oil price, which is over 50 percent lower than the highest price recorded in July of the previous year (USD 1,430).

The Benzene Price Continues its Substantial Fall

Benzene is a basic petrochemical used as a raw material for resins and adhesives, and JX Nippon Oil and Energy Corporation is the Asian price leader.

According to the company’s news release on January 5th, the price for Asia in January was USD 655 per ton, more than 25 percent lower than the previous month’s price of USD 885 per ton.
It’s a substantial fall, continuing from the previous month, and the lowest price since just after the bankruptcy of Lehman Brothers in June 2009.

The background is considered to be the weak demand for resin raw materials, such as styrene monomer and phenol made from benzene; however, we can conclude that the fall follows the oil price, which is over 50 percent lower than the highest price recorded in July of the previous year (USD 1,430).

Mitsui Chemicals of Japan and SKC of Korea to Consolidate Polyurethane Material Businesses

On December 22, Mitsui Chemicals, Inc. (MCI) announced the signing of a joint venture agreement to consolidate the polyurethane material businesses of MCI and SKC Co., Ltd. (SKC).
The consolidated company is going to be established in South Korea around April 2015, expecting the sales of USD1,5 billion per year.

Polyurethane is a collective name for polymers that have a urethane bond (-NH・CO・O-) and the major applications of polyurethane foam include automobile seats and heat insulating materials.
The size of the global market is around 10 trillion Japanese Yen (aprox. USD ten billion) per year.

MCI has already decided to stop polyurethane material production at its TDI plant in Kashima and MDI plant in Omuta in 2016 due to declining earnings under the depressed market conditions caused by large-scale addition of facilities in China.
MCI and SKC intend to maximize the synergy effects by establishing a joint venture in South Korea with an ownership of 50% each.
I hope that MCI will be able to improve its financial standing through a series of structural reforms.

Mitsui Chemicals of Japan and SKC of Korea to Consolidate Polyurethane Material Businesses

On December 22, Mitsui Chemicals, Inc. (MCI) announced the signing of a joint venture agreement to consolidate the polyurethane material businesses of MCI and SKC Co., Ltd. (SKC).
The consolidated company is going to be established in South Korea around April 2015, expecting the sales of USD1,5 billion per year.

Polyurethane is a collective name for polymers that have a urethane bond (-NH・CO・O-) and the major applications of polyurethane foam include automobile seats and heat insulating materials.
The size of the global market is around 10 trillion Japanese Yen (aprox. USD ten billion) per year.

MCI has already decided to stop polyurethane material production at its TDI plant in Kashima and MDI plant in Omuta in 2016 due to declining earnings under the depressed market conditions caused by large-scale addition of facilities in China.
MCI and SKC intend to maximize the synergy effects by establishing a joint venture in South Korea with an ownership of 50% each.
I hope that MCI will be able to improve its financial standing through a series of structural reforms.

Benzene Price Drop

According to the announcement dated December 5 made by JX NIPPON OIL & ENERGY CORPORATION, Asia’s price leader, the contractual price of benzene for December for Asia was settled at USD885 per ton, down by USD210 from the previous month.

This drop in the benzene price is observed as a matter of course considering the historic decline in the crude oil price.
As expectation increases that demand will decrease and the price will drop in the Asia region, the market price in the near term seems to be further weakening and the price has become the lowest in these 4 years.

Benzene Price Drop

According to the announcement dated December 5 made by JX NIPPON OIL & ENERGY CORPORATION, Asia’s price leader, the contractual price of benzene for December for Asia was settled at USD885 per ton, down by USD210 from the previous month.

This drop in the benzene price is observed as a matter of course considering the historic decline in the crude oil price.
As expectation increases that demand will decrease and the price will drop in the Asia region, the market price in the near term seems to be further weakening and the price has become the lowest in these 4 years.

Prices of Petrochemical Products Falling Further in Asia

As has been repeatedly reported in this weblog, the price of every petrochemical product has been weakening since around this summer.
According to a Nikkei Newspaper article dated November 20, “the price of ethylene is USD1,200-1,240 per ton, down 20% since the summer, and the price of benzene is USD930-970 per ton, down 30% since June, when it marked its highest price”.

Although circumstances are specific to each product, all in all, the decreasing prices are due to the drop in demand for end products including resin, rubber, and paint.
This is all because there is a decline in house prices in China due to the downturn in the economy, leading to a drop in imports of raw materials for resin and the like.

Manufacturers of petrochemical products that implemented capital investments on the assumption demand would expand will be in a difficult phase for a while.

Prices of Petrochemical Products Falling Further in Asia

As has been repeatedly reported in this weblog, the price of every petrochemical product has been weakening since around this summer.
According to a Nikkei Newspaper article dated November 20, “the price of ethylene is USD1,200-1,240 per ton, down 20% since the summer, and the price of benzene is USD930-970 per ton, down 30% since June, when it marked its highest price”.

Although circumstances are specific to each product, all in all, the decreasing prices are due to the drop in demand for end products including resin, rubber, and paint.
This is all because there is a decline in house prices in China due to the downturn in the economy, leading to a drop in imports of raw materials for resin and the like.

Manufacturers of petrochemical products that implemented capital investments on the assumption demand would expand will be in a difficult phase for a while.

Nickel Turns to Oversupply in 2014

According to a Japan Metal Bulletin article on October 17, Sumitomo Metal Mining announced that expected demand and supply of nickel will be “15,000 tons of oversupply in 2014 and 32,000 tons of undersupply in 2015”.

Nickel is a metal used for stainless steel, plating and batteries. Russia, Canada, Indonesia, and the Philippines are the main producing countries.
Immediately after the Indonesian government put a ban on the export of nickel ore in January, with the purpose of promoting development in domestic smelting and processing industries, undersupply was expected for 2014.
However, the alternative supply from the Philippines was more than expected and, as a result, there has been an oversupply in 2014.

In 2015, while there will be a growth in demand, stock in China is expected to become scarce, leading to a lack of supply.
If this is the case, the current decreasing trend of the nickel price may reverse at some point of time.

Nickel Turns to Oversupply in 2014

According to a Japan Metal Bulletin article on October 17, Sumitomo Metal Mining announced that expected demand and supply of nickel will be “15,000 tons of oversupply in 2014 and 32,000 tons of undersupply in 2015”.

Nickel is a metal used for stainless steel, plating and batteries. Russia, Canada, Indonesia, and the Philippines are the main producing countries.
Immediately after the Indonesian government put a ban on the export of nickel ore in January, with the purpose of promoting development in domestic smelting and processing industries, undersupply was expected for 2014.
However, the alternative supply from the Philippines was more than expected and, as a result, there has been an oversupply in 2014.

In 2015, while there will be a growth in demand, stock in China is expected to become scarce, leading to a lack of supply.
If this is the case, the current decreasing trend of the nickel price may reverse at some point of time.

Price of Caprolactam Dropped

On October 7, the Nikkei Newspaper reported that the “contract price offered by Ube Industries Ltd., a major caprolactam manufacturer to consumers in Asia during September was USD 2,245 per ton, down by USD 75 (3%) per ton from the previous month”.

Caprolactam is used as a raw material for nylon.
However, many manufacturers in China are currently increasing their production volume, making it very difficult for other companies to earn a margin.
The price of benzene, one of the raw materials of caprolactam, increased in June to August, and sharply fell in September.
In response to this trend, the price of caprolacatam is liable to drop.
In addition to this, due to the deteriorating economic conditions in Asia, the demand for caprolactam has also fallen into a sluggish pace.

Price of Caprolactam Dropped

On October 7, the Nikkei Newspaper reported that the “contract price offered by Ube Industries Ltd., a major caprolactam manufacturer to consumers in Asia during September was USD 2,245 per ton, down by USD 75 (3%) per ton from the previous month”.

Caprolactam is used as a raw material for nylon.
However, many manufacturers in China are currently increasing their production volume, making it very difficult for other companies to earn a margin.
The price of benzene, one of the raw materials of caprolactam, increased in June to August, and sharply fell in September.
In response to this trend, the price of caprolacatam is liable to drop.
In addition to this, due to the deteriorating economic conditions in Asia, the demand for caprolactam has also fallen into a sluggish pace.

PVC Price Decreased

According to the Nikkei Newspaper on October 1, “PVC resin price dropped in Asia, going down to a spot price of USD 1000-1020 per ton, the lowest price in the last 5 months”.
PVC is an inexpensive widely applied plastic made from chlorine, produced from salt and ethylene obtained from naphtha.

Generally, the demand for petrochemical products is rather sluggish these days, PVC doesn’t make an exception. Inquiries for the product are particularly weak in China and India.
Facing the naphtha price drop and a poor demand, reversal of the market situation can be hardly expected for the time being.

PVC Price Decreased

According to the Nikkei Newspaper on October 1, “PVC resin price dropped in Asia, going down to a spot price of USD 1000-1020 per ton, the lowest price in the last 5 months”.
PVC is an inexpensive widely applied plastic made from chlorine, produced from salt and ethylene obtained from naphtha.

Generally, the demand for petrochemical products is rather sluggish these days, PVC doesn’t make an exception. Inquiries for the product are particularly weak in China and India.
Facing the naphtha price drop and a poor demand, reversal of the market situation can be hardly expected for the time being.

Toyo Aluminum Partners with an Indian Company

Toyo Aluminum K.K. announced on September 8 that it had signed a letter of intent for a joint business with MMP Industries Ltd., India.

Toyo Aluminum is a subsidiary aluminum maker of Nippon Light Metal Holdings Company, Ltd., and is strong in aluminum paste, an aluminum pigment mainly used as automotive paint.
Nippon Light Metal‘s consolidated sales for the previous fiscal year were 94.3 billion Japanese yen, with a workforce totaling 2,500.
The sales of MMP for the previous fiscal year were 2.2 billion yen, with a workforce totaling 320.

Their aim seems to be strengthening the sales structure in the Indian market, where many Japanese manufacturers in related industries such as Suzuki Motor, Toyota Motor, Nissan Motor, Honda Motor, Isuzu Motors, Kansai Paint and Nippon Paint have been expanding their business.

Toyo Aluminum Partners with an Indian Company

Toyo Aluminum K.K. announced on September 8 that it had signed a letter of intent for a joint business with MMP Industries Ltd., India.

Toyo Aluminum is a subsidiary aluminum maker of Nippon Light Metal Holdings Company, Ltd., and is strong in aluminum paste, an aluminum pigment mainly used as automotive paint.
Nippon Light Metal‘s consolidated sales for the previous fiscal year were 94.3 billion Japanese yen, with a workforce totaling 2,500.
The sales of MMP for the previous fiscal year were 2.2 billion yen, with a workforce totaling 320.

Their aim seems to be strengthening the sales structure in the Indian market, where many Japanese manufacturers in related industries such as Suzuki Motor, Toyota Motor, Nissan Motor, Honda Motor, Isuzu Motors, Kansai Paint and Nippon Paint have been expanding their business.

Butadiene Price Decreased

According to the Nikkei Newspaper on August 28th, “the prices of butadiene decreased in East Asia, from USD1,650 per ton in early August to USD1,430.”

Butadiene is a petrochemical product made of naphtha and mainly used as a raw material for synthetic rubber.
One of the reasons for the price decrease may be the recent downfall in crude oil price, and another reason may be the continuous downward trend of natural rubber, which is a competing product of synthetic rubber, due to decreased demand.

Butadiene Price Decreased

According to the Nikkei Newspaper on August 28th, “the prices of butadiene decreased in East Asia, from USD1,650 per ton in early August to USD1,430.”

Butadiene is a petrochemical product made of naphtha and mainly used as a raw material for synthetic rubber.
One of the reasons for the price decrease may be the recent downfall in crude oil price, and another reason may be the continuous downward trend of natural rubber, which is a competing product of synthetic rubber, due to decreased demand.