The 39th Asia Petrochemical Industry Conference 2018

Transcription

1 The 39th Asia Petrochemical Industry Conference August, Kuala Lumpur, Malaysia Contents Report on the Japan s Petrochemical Industry..1 Report by Product 1. General Matters & Raw Materials Polyolefins Styrenics PVC & VCM Synthetic Rubber Synthetic Fiber Raw Materials Chemicals...35 Petrochemical Industry of Japan.41

2 Report on the Japan s Petrochemical Industry 1

3 The Status of Japan s Petrochemical Industry in Current situation and future prospects of the Japanese economy 1) The real GDP growth rate for 2017 amounted to 1.6% from the previous year. Against the backdrop of economic recovery of overseas, improved corporate earnings continued to support the growth of capital investment and personal consumption. Reflecting the recovery of foreign economies, exports grew steadily, centering on general machinery and automobiles. With the improvement in corporate earnings, capital investment continued to grow, centering on measures to solve a labor shortage and to increase productivity. Personal consumption made a mild recovery, although with heavy steps. 2) In 2018, the economy will continue to make a mild recovery, resulting in positive growth. There will be such positive factors as a growing demand for infrastructure construction related to 2020 Tokyo Olympics in line with redevelopment projects in the Tokyo metropolitan area. Exports are expected to continue growing, although at a reduced speed due to lower growth rate in China. With the improvement in corporate earnings, capital investment will continue to grow, centering on measures to solve a labor shortage and to increase productivity. Personal consumption will remain steady. Nevertheless, there are geopolitical risks in North Korea and the Middle East, and risks of a downward pressure on the world economy due to the slowdown of the Chinese economy and political uncertainty in the United States and Europe. Furthermore, it is feared that personal consumption may drop due to a decrease in real wages, following the rise in prices of energy and perishable food. It is also feared that labor shortage may restrict supply in some fields, dragging economic growth. Japan s major economic indicators Unit Q1 Q2 Q3 Q4 Real GDP growth rate 1) % Industrial production index 2) 2010= Four-wheel car production 3) 1,000 cars 9,205 9,691 2,542 2,302 2,370 2,477 Housing starts 4) 1,000 houses Exchange rate 5) JPY/US$ Crude oil processing 6) 1,000 KL 191, ,786 49,640 43,309 47,261 46,576 Sources: 1) Cabinet Office: Quarterly figures for 2017 are seasonally adjusted, and compared with the previous term (annual rate). 2) Ministry of Economy, Trade and Industry (METI): seasonally adjusted 3) Japan Automobile Manufacturers Association 4) Ministry of Land, Infrastructure, Transport and Tourism: Quarterly figures for 2017 are before seasonal adjustment. 5) Bank of Tokyo-Mitsubishi UFJ (TTM, yearly average) 6) METI 2

4 2. Current situation of the petrochemical industry of Japan 1) Japan s ethylene production in 2017 rose 4% from the previous year, to 6,530,000 tons, with the average operating rate of crackers reaching 96.8%, up 0.7 percentage point. Operating rates exceeded 95% for two years in a row, due to the reductions in domestic ethylene production capacity carried out until 2016 as well as more-than-expected brisk domestic demand and steady overseas market. Production of all five major plastics (ethylene derivatives) increased yearon-year. Domestic demand (ethylene equivalent) increased 5% from the previous year, to 5,057,000 tons, recovering to the five-million-ton range for the first time in three years. Japan s ethylene production and ethylene-equivalent balance Unit Q1 Q2 Q3 Q4 Production KT 6,279 6,530 1,672 1,566 1,607 1,685 Domestic demand (ethylene equivalent) KT 4,815 5,057 1,263 1,201 1,266 1,327 Export (ethylene equivalent) KT 2,234 2, Import (ethylene equivalent) KT Source: METI Japan s production of major petrochemicals Unit LDPE HDPE PP PS PVC (Five SM EG AN plastics total) 2015 KT 1, , ,646 7,202 2, KT 1, , ,651 7,122 1, KT 1, , ,706 7,345 2, Source: METI 2) In 2018, demand in both Asia and Japan will remain steady. We need to closely monitor the influence of shale-gas-derived U.S. petrochemical products on the supply-demand balance in Asia. The influence is expected to be limited, however, as shutdown maintenance of crackers will be concentrated in Tasks for the petrochemical industry of Japan 1) Optimizing production capacity and shifting to high-value-added areas The move of cracker closures has come to a halt. Reorganization and concentration of derivative plants are still progressing, however, centering on polyolefins. While overall capacity is being reduced, producers of derivatives are accelerating their move to shift from commodities to high-value-added areas and to expand high-performance product lines. 2) Increasing cost competitiveness The industry is going to face fierce global competition due to the influx of shale-gas-derived petrochemicals from North America. Thus, the industry needs to increase cost competitiveness 3

5 more than ever. While there is difference by company, the following are major steps being taken to increase cost competitiveness: a) Vertical alliance with oil refineries, and horizontal alliance within a complex and with related firms around the complex b) Development of new products from unused cracker fractions, and their effective use c) Replacement of aging derivative plants to achieve higher efficiency with lower operating cost d) Cost reductions through pursuit of energy conservation 3) Measures to protect safety and the environment The petrochemical industry places high priority on safety and stable operation because troubles with equipment operated at high rates could greatly affect customers as well. To enhance the safety level, the industry is taking various measures to increase the management s commitment, foster safety culture, and utilize new technologies, such as Internet of Things and artificial intelligence. Furthermore, the industry is called on to make contributions toward resolving environmental issues, including global warming. Under such circumstances, the industry is working hard to take appropriate measures in cooperation with the government. 4

6 1. General Matters & Raw Materials 5

7 Item: Naphtha, LPG, Heavy Condensate and Gas Oil 1. Supply and Demand Balance (Unit: 1, KKL; 1,000 MT for LPG) Naphtha Demand For ethylene For BTX Supply Domestic For petrochemicals ,788 18,321 28,813 19,397 30,307 19,689 Total demand (1) 50,109 48,210 49,996 For other products 19, , ,758 Total 19,206 20,002 18,791 Import For petrochemicals 27,799 24,087 27,057 Total supply (2) 47,005 44,089 45,848 LPG Demand For ethylene Heavy Condensate Demand For ethylene Gas Oil Demand For ethylene Sources: Chemical Industry Statistics by METI; Customs Clearance Statistics by MOF Note: The differences between (1) and (2) are due to the use of different sources Naphtha Import Quantities by Exporting Countries (Unit: 1,000KL) Country United Arab Emirates 3,164 4,344 4,926 Qatar 3,686 4,282 4,138 India 3,169 2,509 3,389 Korea 4,541 3,593 2,993 Kuwait 2,117 2,233 2,847 Russia 2,279 1,921 2,363 Saudi Arabia 3,847 1,589 2,317 Bahrain Algeria USA Norway Peru Others 2,156 1,564 1,670 Total 27,799 24,087 27,057 Source: Customs Clearance Statistics by MOF 6

8 3. Market Trend in ) Demand for Naphtha 30,307 KKL of Naphtha was consumed by Japanese ethylene producers in It was 5.2% increase from 2016 because of higher cracker operation thanks to healthy demand of all products. Naphtha demand for BTX production was almost the same with its figure in ) Domestic Naphtha Supply Domestic Naphtha supply for the petrochemicals sector in 2017 was 18,758 KKL, which was 5.9% lower than the previous year. It was about 37.5% of total Naphtha supply to the Japanese petrochemical sector. The main reason for that decrease of domestic Naphtha supply was lower crude throughput comparing to it in ) Imported Naphtha 27,057 KKL of Naphtha was imported to Japan for petrochemical uses in It was 2,970 KKL, or 12.3% increase from the previous year. Import from UAE which was the largest country of import in 2017 was increased by 582 KKL to 4,926 KKL. 4) LPG LPG consumption for petrochemicals in 2017 was decreased by 12.4% from the previous year to 620 KMT due to lower economics of it as feedstock for petrochemicals. 5) Heavy Condensate The consumption of heavy condensate was increased by 110.6% from 2016 to 238 KKL in ) Gas Oil The consumption of gas oil in 2017 was 63 KKL, 41.1% decreased from the previous year. The share of gas oil as petrochemical feedstock for naphtha was only 0.1%. 4. Outlook for ) The current demand of petrochemicals sector is firm and high operation rate of steam cracker will be maintained in Given the current macro-economic outlook, ethylene output in Japan is expected to continue at the same level of ) Deficit of naphtha supply in east of Suez will be continued as far as steady demand of petrochemicals sector is maintained, but it may be covered by the supply of arbitrage Naphtha from Europe and America and other feedstock (e.g. LPG) availabilities. 7

9 Item: Olefins 1. Supply and Demand Balance Ethylene Propylene Butadiene (Unit: 1,000MT) Production 6,883 6,279 6,530 Export Import Production 5,723 5,223 5,459 (From Cracker) (4,502) (3,975) (4,162) (From FCC) (1,221) (1,248) (1,297) Export 1, Import Production Export Import Source: Chemical Industry Statistics by METI, Trade Statistics by MOF 2. Market Trend in 2017 The produced volume of olefins in Japan in 2017 increased from that in 2016 due mainly to the decrease in numbers of plants shut down for periodic maintenance or repairs from six in 2016 to three in The average of operating rates of domestic naphtha crackers increased from 96.2% in 2016 to 96.9% in 2017, which was the highest average operating rate in the past five years. This high operating rate was a result of strong demand for olefins in Asia including Japan, the year-round higher cracker margin than that in the previous year, and the increase in operating rates of plants other than crackers and plants to produce derivatives which were permanently shut down by the end of ) Ethylene The production volume of ethylene in 2017 was 6,530KT, an increase of 4%, or 251KT, from 6,279KT in the previous year. This increase was caused by a decrease in the number of naphtha crackers subject to periodic maintenance from that in the previous year, and the increase in operating rate of naphtha crackers due to the increase in the demand for derivatives including PE, SM, and EDC. The domestic ethylene equivalent demand in 2017 also increased 5%, or 242KT, from that in 2016, to 5,057KT in On the other hand, in 2017, export of ethylene was 701KT and import of it was 132KT, which were at the same level as those in Therefore, all of the increase in production volume of ethylene was supposed to be consumed in Japan to respond to the increase in domestic demand. 8

10 2) Propylene The production volume of propylene in 2017 was 5,459KT, an increase of 5%, or 236KT, from 5,223KT in the previous year. Propylene production from naphtha cracker increased 187KT, and propylene production from FCC increased 49KT. Both of them were about 4% to 5% increase from those of the previous year. The export volume of propylene in 2017 decreased 57KT from the previous year, and the import volume of propylene in 2017 increased 43KT from the previous year. The decrease in export volume and the increase in import volume were caused mainly by the increase in domestic demand for derivatives including PP and phenol surpassing the increase in production of propylene. 3) Butadiene The production volume of butadiene in 2017 was 916KT, an increase of 5%, or 43KT, from the previous year. The export volume of butadiene decreased 7KT, to 27KT, and the import volume of butadiene increased 8KT, to 62KT, both from the previous year. The amount of domestic demand for butadiene increased 58 KT from the previous year, to 951KT, due mainly to the increase in domestic production volume of derivatives including ABS and SBR. 3. Outlook for 2018 In 2018, many naphtha crackers in Northeast Asia are expected to have periodic shutdown maintenance, seven in Japan, three in South Korea, and one in Taiwan. Moreover, the number of new plants such as naphtha crackers, CTOs and MTOs in Northeast Asia are quite limited. On the other hand, the demand for olefins in 2018 is expected to continue steady growth not only in Japan but also in the whole area of Asia including China. Therefore, naphtha crackers in Japan are expected to maintain high operating rates throughout However, in the second half of 2018, the Asian market environment for olefins may be gradually affected by the expected increase in the amount of inflow of polyethylene from shale-gas-based ethane crackers and polyethylene plants in the U.S. which are scheduled to start operations from late 2017 to the first half of Estimated Issues in the future Global demand for ethylene is expected to continue increasing in proportion to the rate of global economic growth. On the other hand, the speed of increase in the global supply of ethylene in the near future is expected to be slower than that estimated before 2017 due partly to a delay in startup of operation of ethane crackers in the U.S., and delays in or revisions to construction and expansion plans concerning CTOs and MTOs caused by a decline in crude oil price and stricter environmental regulations in China. However, plans to newly establish ethane crackers in the U.S. will surely be implemented. There are many plans announced in succession to newly establish large crackers in Asia centering in China following the favorable cracker margin of these days. Therefore, progress in these plans and changes in growth rate of the demand for olefins may negatively affect the operating rates of crackers in Japan due to deterioration in market conditions caused by an ease in supply demand 9

11 balance for olefins in Asia. Under these circumstances, Japanese petrochemical companies will continue strengthening competitiveness through various measures including regional alliances, shift from general purpose products to high-value-added products, and vertical integrations, thereby improving and stabilizing their profitability. 10

12 Item: Benzene, Toluene, Xylene 1. Supply and Demand Balance 1) Benzene (Unit: 1,000MT) Supply Demand Production 4,061 4,073 4,379 Import Total 4,353 4,134 4,529 Domestic 3,720 3,244 3,763 Export Total 4,338 4,132 4,514 Capacity 5,667 5,722 5,741 Source: Chemical Industry Statistics by METI, Trade Statistics by MOF 2) Toluene (Unit: 1,000MT) Supply Demand Production 2,024 1,985 2,152 Import Total 2,028 1,993 2,156 Domestic 1,286 1,377 1,469 Export Total 2,037 1,973 2,145 Capacity 2,606 2,606 2,680 Source: Chemical Industry Statistics by METI, Trade Statistics by MOF 3) Xylene (Unit: 1,000MT) Supply Demand Production 6,413 6,703 6,779 Import Total 6,413 6,703 6,779 Domestic 4,413 4,645 4,804 Export 2,026 1,999 1,953 Total 6,439 6,644 6,757 Capacity 8,487 8,844 8,803 Source: Chemical Industry Statistics by METI, Trade Statistics by MOF 11

13 1. Market Trend in ) BTX production in Japan As for 2017 Benzene, Toluene and Xylene production, all BTX production increased. Benzene production increased by 7.5% to 4,379KTA, Toluene production increased by 8.4% to 2,152KTA and Xylene production increased by 1.1% to 6,779KTA from previous year respectively. Total BTX production increased by 4.3% to 13,310KTA compared with previous year. 2) BTX domestic demand Benzene Benzene domestic demand increased by16.0% to 3,763KTA compared with previous year. The main Benzene derivative Styrene monomer, Phenol and Cumene production surpassed previous year. To be more specific, Styrene monomer which consist 44% of Benzene demand increased by7.1%, Phenol and Cumene which consist 24% of Benzene demand increased by 13.6% compared with the previous year. Toluene Toluene domestic demand increased by6.7% to 1,469KTA compared with previous year. The main factor of increase was supported by the high demand of Para-xylene. It increased the TDP demand, which consist 52% of toluene, by 11.1% compared with the previous year. Xylene Xylene domestic demand increased by 3.4% to 4,804KTA compared with previous year. The main factor of increase was supported by isomerization demand. It consist 98% of xylene demand and it had increased by 3.5% compared with previous year. Total BTX domestic demand increased by 8.3% to 10,036KTA compared with previous year. 3) BTX Export and Import Due to the strong domestic demand Benzene export quantity decreased by 15% to 751KT, while import quantity increased by 146% to 150KTA compared to the previous year. Toluene export quantity remarkably increased by 13.4% to 676KT for Asian export. Import quantity which is normally a small amount has decreased by 47% to 4KTA compared to the previous year. Xylene export quantity slightly decreased by 2.3% to 1,953KTA. There was no import two years in a row. 12

14 2. Outlook for 2018 BTX demand in Japan is expected to be approximately same level as previous year ) Benzene Benzene domestic demand is expected to be decreased by 8% mainly due to the Benzene derivative Styrene Monomer plant maintenance. Phenol and Cumene domestic demand is expected to be the same as Benzene export quantity will recover to the level of 2016 and demand of total Benzene demand is expected to be 97% compared with previous year ) Toluene Toluene domestic demand and export quantity is expected to remain the same as last year. Total Toluene demand is expected to be 100% compared with previous year ) Xylene The domestic production of xylene is expected to decrease by 5% due to the maintenance of isomerization plant. Xylene export quantity is expected to have slight increase by 2%. Total xylene demand is expected to be 97% compared with previous year

15 2. Polyolefins 14

16 Item: Polyolefins 1. Supply and Demand Balance Domestic demand: Including raw resins and finished products Unit: 1,000MT, ( ) % over previous year LDPE (including L-LDPE, EVA) HDPE PP Supply Demand Supply Demand Supply Demand / 16 (%) Production 1,713 1,744 1,770 1 Import of Raw Material Resins Import of Finished Products Import Total Domestic 2,142 2,125 2,167 2 Export Total 2,388 2,402 2,407 0 Production Capacity 2,218 2,233 2,233 0 Production Import of Raw Material Resins Import of Finished Products Import Total Domestic 1,224 1,245 1,306 5 Export Total 1,358 1,374 1,443 5 Production Capacity 1,142 1,142 1,142 0 Production 2,501 2,466 2,506 2 Import of Raw Material Resins Import of Finished Products Import Total Domestic 2,707 2, Export Total 3,016 3, Production Capacity 2,874 2,874 2,759-4 Source: Chemical Industry Statistics by METI, Trade Statistics by MOF 15

17 2. Actual shipments of products manufactured in Japan for supply to the home market in 2017 Unit: 1,000MT, %over previous year LDPE HDPE PP Film Laminating Oriented Tape (Flat Yarn) Injection Molding ,351 2 Blow Molding Fiber Pipe Wire and Cable 57-2 Others Total 1, ,441 2 Source: Chemical Industry Statistics by METI, Trade Statistics by MOF 3. Market Trend in ) Domestic demand PE: Throughout the year, total polyethylene (PE) domestic demand for resins and finished products increased by 3%, 103,000MT from the previous year, LDPE increased by 2%, 42,000MT, and HDPE increased by 5%, 61,000MT. Total domestic production increased by 3%, 86,000 MT from the previous year, LDPE increased by 1% 26,000MT and HDPE increased by 7%, 60,000 MT. The shipment of the domestic products of LDPE increased by 2%, HDPE almost stayed. Especially, Film and Laminating (LDPE) increased steadily, and injection molding of (LDPE & HDPE) increased from the previous year. PP: Domestic demands increased by 4% over the previous year. It is speculated that the return from the imported products to the domestic ones (General goods & OPP film) or the shift from the imported polypropylene (PP) resin to the domestic PP, with the depreciation of the yen. Domestic shipments of PP resin manufactured in Japan, on the other hand, increased by 2% over the previous year. It is estimated that the 2 nd half of this year was sluggish in the field excluding industrial parts and fibers due to the shortage of domestic resin from domestic manufacturer problems occurred in the 2 nd half of this year. 2) Imports PE: The imported resins increased by 16%, LDPE increased by 7% and HDPE also increased considerably by 33% from the previous year. 16

18 The imported finished products increased by 3%, LDPE increased 5% and HDPE also increased by 2%. PP: The Imported of raw materials increased 24% over the previous year. It is estimate that the import volume has increased significantly in order to compensate for the shortage of domestic resin caused by domestic manufacturer troubles occurred in the 2 nd half of this year. Import of overall products increased by 5% over the previous year especially nonwoven fabrics and film sheets grew. 3) Exports PE: The exported resins decreased by 7%, LDPE decreased by 13%, but HDPE increased by 6% from the previous year. PP: The exported of PP increased 4% over the previous year. It is infer that competitiveness has increased due to the depreciation of the yen. On the other hand, in recent years, there is no big change as the total quantity. 4. Outlook for 2018 PE: It is expected to be steady growth of economy in 2018 and then consumption of PE will be expected to increase. PP: The domestic PP demand will stay steady and remain strong particularly in the toiletry, food and fiber segments. 17

19 3. Styrenics 18

20 Item: PS (GP/HI) 1. Supply and Demand Balance (Unit: MT) /16 (%) Supply Production 674, , ,100 3 Import 40,600 31,400 30,500-3 Total 715, , ,600 2 Demand Domestic Demand 635, , ,100 1 Export 22,500 29,900 31,600 6 Total 658, , ,700 1 Production Capacity 816, , ,000 5 Source: Japan Styrene Industry Association, Trade Statistics by MOF 2. General Results of PS in 2017 Annual production for 2017 slightly increased to 706,100 tons, up 3% compared to the previous year, recovering to 2010 production levels (703,300 tons). Production was relatively strong throughout the year. Domestic shipments were 670,100 tons, up 1% from the previous year. Results by application show that the packaging application decreased by -2% compared to the previous year. The sundries and industrial application maintained moderate growth, increasing by 1% on a full-year basis. The application for foamed styrene maintained relatively steady growth in 2017 with 6% increase compared to the previous year. Electric & electronic and industrial applications, while having a small volume, had a steady growth in 2017 with 2% increase compared to the previous year. Exports, while having a small volume, increased to 31,600 tons, up 6% from the previous year. Looking at the demand structure of 2017, both production and domestic shipments slightly exceeded those of the previous year on a full-year basis, recovering to 2010 production & domestic shipments level. Imports fell to 30,500 tons due in part to the exchange rate, which was offset by an increase in domestic shipments. 3. Outlook for 2018 The aggregate domestic demand including import slightly increased to 700,600 tons, up 1% compared to the previous year. In a situation in which there are concerns about the exchange rate, raw fuel prices, impact of BZ prices, PS alternative trends, etc., the development of new usages, etc., is a critical issue for maintaining and improving domestic demand. 19

21 Item: Styrene monomer 1. Supply and Demand Balance (Unit: MT) /16 (%) Supply Production 2,412,600 1,947,900 2,084,500 7 Import 0 2, Total 2,412,600 1,950,000 2,084,500 7 Demand Domestic Demand 1,411,900 1,416,000 1,488,500 5 Export 1,009, , ,400 7 Total 2,421,500 1,967,200 2,080,900 6 Production Capacity 2,255,000 1,949,000 1,949,000 - Source: Japan Styrene Industry Association, Trade Statistics by MOF 2. General Results of SM in 2017 Annual production for 2017 was 2,084,500 tons, increasing by 7% from the previous year. Although, regular maintenance and repair works took place in 2017, as the result, the production volume increased from the previous year. Domestic shipments were 1,488,500 tons, gradually increasing by 5% from the previous year, maintaining a stable shipment volume. Results by applications show that shipment for PS production, the main use of SM, remained at around the level of the previous year. ABS increased significantly by 18% compared to the previous year, furthermore synthetic rubber grew 12% compared to the previous year. EPS slightly increased from the previous year, and overall, shipments for respective applications excluding PS grew steadily. Exports showed 7% increase to 592,400 tons compared to the previous year. In 2017 annual production was increased, so both domestic shipments and exports increased from the previous year. In 2017 overall, while there were regular maintenances and repair works at styrene manufacturers, a high operating rate was maintained. 3. Outlook for 2018 Production capacity will be under 2,000,000 tons, therefore maintained a high operating rate will be requested. And the production and shipment structures will be similar to the previous year. 20

22 Item: ABS Resin (Unit: MT, %) Growth Rate Supply Production 376, , , Import 41,100 48,300 40, Total 417, , ,300 7 Demand Domestic 229, , ,700 9 Export 127, , ,500 3 Total 357, , ,200 7 Nameplate Capacity n.a. n.a. n.a. Source: Chemical Industry Statistics by METI, Trade Statistics by MOF, Japan ABS polymer Industry Association 21

23 4. PVC & VCM 22

24 Item: Polyvinyl Chloride (PVC) 1. Supply and Demand Balance (Unit: Qty.:1,000 metric tons, Ratio: %) Qty. Ratio Qty. Ratio Qty. Ratio Production 1, , ,664 3 Domestic Shipment 1, , ,045 3 Import Domestic Demand 1, , ,049 3 Export Total Shipment 1, , ,653 4 Source: VEC (the Vinyl Environmental Council), Trade Statistics by MOF 2. Domestic Shipments by Application Segments (Unit: Qty.:1,000 metric tons, Ratio: %) Qty. Ratio Qty. Ratio Qty. Ratio Rigid Flexible Cables, others Total Domestic Shipments 1, , ,045 3 Ratio: percentage of the application within all applications Source: VEC 3. Production Capacity (Unit: 1,000 metric tons per year) , , ,929 Source: METI 4. Market Trend in 2017 (1) Production Volume The production volume of PVC in 2017 was 1,664KT, which was 47KT more than the previous year. When we looked at the components, only the Import was the same level as the previous year, and the others were increasing. The Domestic Demand was 34KT more than 2016.The Export was 23KT more than 2016.The difference from 2016 was that the enlargement of Japanese PVC production was lead by not only the growth of export, but also Domestic Demand. (2) Domestic Shipments & Demand The Domestic Shipment was 1,045KT, which was about 3% higher than the previous year. The Domestic 23

25 Demand of PVC in 2017 was 1,049KT, which went up a little level from Japanese domestic demand has been same as previous year in 2016, but this year was a little different. Rigid Application The shipment for rigid application was 575KT, which was about 5% higher than the previous year. Among rigid application, the demand for Pipe and Injection accounts for 70%. So, it is said that the demand of rigid application is influenced by the number or of new-housing. In 2017, the total floor area of Nonresidential facilities increased especially. It was lead by the construction for Tokyo Olympic Games. Such a high level of demand is expected to keep in Flexible and others application The demand for Flexible application was 250KT which was 2% higher than the previous year, and the demand for Cable and others was 220KT which was 1% higher than 2016.It was lead by the growth of the factory automation, number of auto sales(106% on 2016),and etc. (3) Exports The export from Japan was 608KT, which was 4% higher than the previous year. The shipments to India rose significantly because Indian demand showed about 6% growth per year and Japanese material became the key source more than Taiwanese. Historically, Taiwanese was the biggest PVC supplier in India. But in 2017, Japan became that. 5. Outlook for 2018 Generally speaking, Domestic Demand of PVC seems to keep the high level from 2017 to Tokyo Olympic Games 2020.It will depend on the construction for Olympic, and growth of factory automation related about IoT. The big topic of Domestic Production is that each company has the Large-term (about 30-50days) maintenance in So, the production in Japan will be less than They will reduce the amount of Export. Because of this large maintenance, the price of PVC to India is expected to rise up. And, no company has a plan of the big expansion of PVC capacity in In conclusion, PVC companies in Japan will manufacture fully because Demand will keep the high level and having such maintenances. 24

26 Item: Vinyl Chloride Monomer (VCM) 1. Supply and Demand Balance (Unit: Qty.:1,000 metric tons, Ratio: %) Qty. Ratio Qty. Ratio Qty. Ratio Production 2, , ,723 5 Domestic Shipment 1, , ,776 5 Import Domestic Demand 1, , ,776 5 Export Total Shipment 2, , ,726 6 Source: VEC, Trade Statistics by the MOF 2. Production Capacity (Unit: 1,000 metric tons per year) , , ,774 Source: METI 3. Market Trend in ) Production Volume The production volume of VCM in 2017 was 2,723 thousand tons, that was 105.2% on the previous year. 2) Shipments The domestic shipment of VCM in 2017 was 1,776 thousand tons. That was 104.5% on the previous year, as the result of increased domestic PVC production. 4. Outlook for 2018 VCM production in 2018 is expected to decrease compared to that 2017, because the shutdown maintenance is planned longer than in 2017 at some VCM plants. Therefore, the shipments of VCM in 2018 will be less than in

27 5. Synthetic Rubber 26

28 Item: Synthetic Rubber 1. Supply and Demand Balance (Unit: MT, %) Actual Annual Annual Annual Actual Actual Change Change Change Production 494, , ,000 4 Import 63, , ,600-2 SBR (Solid) BR (Solid) Others Domestic 307, , ,600 (1) 1 Shipment Export 213, , ,400 7 Total 520, , ,000 3 Capacity 611, , ,000 1 Production 310, , , Import 29, , , Domestic 231, , ,800 (1) 1 Shipment Export 135, , ,800-6 Total 367, , ,600-3 Capacity 296, , ,000 0 Production 878, , ,900 1 Import 72, , ,400 1 Domestic 349, , ,200 (1) 1 Shipment Export 445, , ,100 1 Total 794, , ,300 1 Capacity Production 1,668, ,564, ,620,700 4 Import 166, , ,600-4 Total Shipment Capacity Domestic 888, , ,600 (1) 1 Export 793, , ,300 1 Total 1,668, ,721, ,736,900 1 Source: Chemical Industry Statistics by METI, Trade Statistics by MOF, (1)The Japan Rubber Manufacturers Association (JRMA) 27

29 2. Market Trend in 2017 Against the background of steady improvement of employment and income situation, gradual increase in private consumption, and expansion of exports due to strong external demand, the Japanese economy is on a moderately recovery trend. Consequently, the growth rate of Japanese real GDP for 2017 is expected approximately 1.5%. (1) The number of the domestic car production was 9.7 million units, up by 5% from the previous year. (2) The car exports increased 2%, and the domestic sales increased 5% due to the good sales of new models and rising purchase wills of consumer, the domestic car production rose. Domestic tire production resulted in 145 million units, down by 1% from the previous year. (3) Although the domestic sales were good, export sales were decreased for three consecutive years. The domestic production of SR was 1.6 million MT, a 4% up from the previous year. The demands remained firm both for domestic and overseas. 3. Outlook for 2018 The Japanese economy is expected to continue expanding, with an expected 1.2%growth rate of the Japanese real GDP in (1) The Bank of Japan (BOJ) set the inflation target on 1.4%, and kept timeline for 2% target to around The BOJ is continuously coordinating necessary policies with Japanese Government to achieve Price stably target of 2%. The number of the domestic car production is expected 9.5 million units, a 2% down from the previous year. Domestic tire production is expected to decrease 1%, since the domestic and overseas demands will be slightly less than the previous year. The domestic production of SR is expected to the same level as the previous year. The demand trends won t change so big both in domestic and overseas. (1) International Monetary Fund (IMF) (2) Japan Automobile Manufacturers Association, Inc. (JAMA) (3) Japan Automobile Tire Manufacturers Association, Inc. (JATMA) 28

30 6. Synthetic Fiber Raw Materials 29

31 Item: Ethylene Oxide(EO), Ethylene Glycol(EG) 1. Supply and Demand Balance EO (Unit:MT) Production 933, , ,800 Supply Import Total 933, , ,800 Domestic 411, , ,300 Demand Direct Export Total 411, , ,300 Year-end Capacity 921, , ,000 Excluding the demand for EG Source: Chemical Industry Statistics by METI, Trade Statistics by MOF EG (Unit:MT) Supply Demand Production 726, , ,900 Import 3,900 5,700 4,000 Total 730, , ,900 Domestic 392, , ,100 Direct Export 338, , ,500 Total 730, , ,600 Source: Chemical Industry Statistics by METI, Trade Statistics by MOF 2. Market Trend in 2017 The Japanese EO demand of 2017 increased by 5% compared with the previous year. The demand for surfactant which is the main EO application has increased due to the continuing expansion of the liquid detergent market, and the demand for the other EO applications has also increased. As for EO supply, production volume increased by 9% due to a shorter shutdown maintenance period of each company compared with the previous year. The Japanese EG demand of 2017 increased by 4% compared with that of Although the demand for polyester which is the main EG application has decreased due to the continuing decline in demand since 2014, the demand of the other EG applications has increased. In terms of the export volume of EG from Japan in 2017, it increased by 21% due to a shorter shutdown maintenance period of each company compared with the previous year. 30

32 3. Outlook for 2018 The Japanese EO demand of 2018 is expected to be a slight increase. The demand for surfactant will keep increasing due to the continuing expansion of the liquid detergent market. On EG domestic demand in 2018, it is expected to decline in demand below the previous year. The demand for anti-freezing is expected to be the same level as the previous year, but the demand for polyester is expected to be a decrease continuously. In terms of export volume of EG from Japan in 2018, it is expected to decrease due to be a longer shutdown maintenance period compared with

33 Item : Acrylonitrile (Unit: 1,000MT) 17/ 16 (%) Production Supply Import Total Domestic Demand Export Total Year end Capacity Note: Capacity excludes turn-around capacity investigated by Ministry of Economy, Trade and Industry Domestic demand includes import demand. 1. Acrylonitrile Market Trend in 2017 (a) The amount of Acrylonitrile ("AN") production in Japan has increased by 4% to 435 thousand metric tons from the previous year. The increase is attributed to the sustainable demand for AN, especially from Acrylonitrile-Butadiene-Styrene ( ABS ) resin. (b) The amount of AN import to Japan has decreased by 32% to 17 thousand metric tons from the previous year. <Import amount by countries> (unit: 1,000MT) Korea 6 14 USA Total (c) The amount of AN export from Japan has increased by 56% to 23 thousand metric tons from the previous year. <Export amount by countries> (unit: 1,000MT) Korea 8 5 China 7 0 Malaysia 7 4 India 1 0 Taiwan 0 6 Total (d) The supply/demand situations of AN derivatives in Japan were as follows: 1 The amount of Acrylic Fiber ("AF") production has decreased by 5% to 120 thousand metric tons from the previous year. The reduction of profitability caused by increase in raw material cost has led to decreased AF production. 2 The amount of ABS resin production increased by 10% to 400 thousand metric tons from 32

34 the previous year. The increase is attributed to growing demand especially from automobiles. 3 The demand for other AN derivatives remained the same level compared to the previous year. To summarize the above, the domestic demand for AN remained the same level (437 thousand metric tons) compared to the previous year. The total demand for AN, which includes export amount from Japan, was 460 thousand metric tons, increased by 1% from the previous year. 2. Global AN Market Outlook for 2018 The demand for AN in 2018 is expected to grow. The demand from AF is considered to decrease from The demand from ABS resin is expected to increase from 2017, reflecting continuous growth in Asia, especially in China. The demand from other AN derivatives, including Carbon Fiber, Acrylamide, and Nitrile- Butadiene Rubber is also expected to grow continuously. 33

35 Item: Caprolactam 1. Supply and Demand Balance (Unit:MT) Supply Production 257, , ,200 Import Total 257, , ,200 Demand Domestic 127, , ,000 Export 131,100 94,900 84,100 Total 258, , ,100 Source: Chemical Industry Stats. by METI Trade Stats. by MOF 2. Market Trend in 2017 An operation ratio of caprolactam (CPL) plant in Japan was increased from a previous year s and reached 80%, 221KMT under favorable aspects at the global market. Its production volume has headed north at the first time since CY2010. An Asian merchant market in CY2017 had been closed by better ending for CPL-PA6 chain. A CPL spread over Benzene improved much more than CY2016 s. A CY2017 market started US$2,000/MT (CFR) over in the following prosperous conditions at the end of CY2016. After hitting the lowest price in May, CPL price stably went up. China who had expanded CPL capacity at 1million MT in CY2017 was into unstable operation due to shortage of raw material, environmental inspection/audit, technical troubles etc. Asian market received less U.S.A./Europe exported cargoes. Strong PA6 demand also, in addition to the aforesaid supply situation, supported CPL market and lifted up CPL price. 3. Outlook for 2018 A market fundamental seems to remain unchanged from CY2017 s. In China, her new administration will have kept the current environmental policy and raw material situation will not see any big improvement. U.S.A./European market has mostly made balance between supply and demand, and has not needed to export CPL to Asia. In the meanwhile, China has an expansion project at 770KMT on a paper in CY2018. If all goes well on schedule, China market will increase CPL nominal capacity by approx. 2million MT within this 2-year. PA6 capacity also has been more. As one of outlets of CPL business, CPL manufactures have turned to their own captive use from sales of CPL itself. PA6 instead of CPL may enter into tough competitions and it is afraid of domino effects to trigger dull CPL market. To prevent to go back to unfeasible business conditions, Price Formula system is applied between CPL and PA6 sectors widely, and coalition/integration within CPL-PA6 chain is accelerated. Both directions aforesaid are challenges to contribute more stable market and business transactions. A good sign like this is expected to guide the market properly. 34

36 7. Chemicals 35

37 Item: Acetaldehyde 1. Supply and Demand Balance (Unit: MT) Supply Demand Production 90,600 87,100 87,500 Import Total 90,600 87,100 87,500 Domestic 92,200 87,700 92,600 Export Total 92,200 87,700 92,600 Production capacity (at year-end) Source: Chemical Industry Statistics by METI; Trade Statistics by MOF, etc. 289, , , Market Trend in 2017 Demand for acetaldehyde is stable after ethyl acetate application gets lost. 3. Outlook for 2018 Demand is expected to be unchanged with previous year. 36

38 Item: Acetic Acid 1. Supply and Demand Balance (Unit: MT) Supply Demand Production n.a. n.a. n.a. Import 130, , ,800 Total n.a. n.a. n.a. Domestic n.a. n.a. n.a. Export 27,900 28,100 15,900 Total n.a. n.a. n.a. Production capacity (at year-end) n.a. n.a. n.a. Source: Chemical Industry Statistics by METI Trade Statistics by MOF 2. Market Trend in ) Domestic demand Production rate for VAM continuously kept high level because demand for deliberates were also high level and depreciation of Japanese Yen supported their export business. The demand for PTA also kept firm volumes under the tight supply-demand balance in Asia. Acetic anhydride kept same level because its main application as LCP and cellulose acetate was running at normal production rate during Esters production volume increased because of firm consumption on Japan market. 2) Import volume increased comparing with 2016, because of longer shut down terms at Daicel in 2017, than annual year. 3) Export volume decreased comparing with 2017, and most of them were shifted to domestic supply. 3. Outlook for ) Domestic demand is expected to keep same level. Tight balance in Asia including Japan will continue during 2018, in terms of environmental regulations and expansion of demand in China. VAM production is expected keep high production rate during whole year. Demand for PTA and Acetic anhydride is expected to keep same volumes. 2) Import is expected to keep same volumes 3) Export volume of Acetic acid is expected slightly decrease particularly until second quarter of this year. International VAM supply-demand balance is expected to keep well balance especially ethylene based process. PTA is also keeping healthy operation rate. 37

39 Item: Phthalic Anhydride (PA) 1. Supply and Demand Balance (Unit : MT) Production 155, , ,400 Supply Import Total 155, , ,500 Domestic 106, , ,321 Demand Export 48,900 53,500 49,800 Total 154, , ,121 (Data Source) Production: Chemical Industry, Statistics (METI) Import/Export: Import Export Statistics (MOF) Domestic Demand: Japan Dyestuff and Industrial Chemicals Association (JDICA) 2. Market Trend in ) Production of the phthalic anhydride was 162,400MT increased the previous year. 2) The domestic demand was 115,321MT increased the previous year. Demand for main use's plasticizer was 109% compared with the previous year, 101% for paints, 101% for unsaturated polyester resins. 3) Export was 49,800 tons and 92% compared with the previous year. (Due to the production trouble) 3. Outlook for 2018 Export is expected to increase compared with (Due to keep the high price in Asian market.) 38

40 Item: Phenol 1. Supply and Demand Balance (Unit: MT, %) Supply Production 645, , , Import 34, , , Total 680, , , Demand Domestic 595, , , Export 78, , ,600-6 Total 674, , , Source: Industrial and Chemical Statistics by METI, Customs Clearance Statistics by MOF 2. Market Trend in ) In 2017, GDP growth rate was 1.5%, which was slightly improved from previous year. 2) The domestic demand in 2017 was 659KT, 9.6% increased from previous year. Consists of BPA use (373KT : +8.7% from 2016), Phenolic resin use (126KT : -3.7% from 2016). Demand for BPA grew significantly led by Polycarbonate demand growth. Phenolic resin demand is stable. New application, cyclohexanone also contributed demand growth. Export volume was 61KT, which was 4KT decrease from Import was 54KT, which was 19KT decrease from ) Operation ratio was 91%. Higher than previous year because of active demand. 3. Outlook for 2018 Demand remains active. Demand for cyclohexanone, which started second half of 2017, will contribute whole year. Production will decrease because of longer maintenance shutdown. Therefore import quantity will increase to cover domestic demand. 39

41 Item:Methanol Supply Demand (Unit:1,000 tons) Production Import 1,697 1,628 1,760 Total 1,697 1,628 1,760 Domestic 1,691 1,596 1,743 Export Total 1,697 1,628 1,760 Source: Chemical Industry Statistics by METI Trade Statistics by MOF 40

42 Petrochemical Industry of Japan 2018 Japan Petrochemical Industry Association 41

43 INDEX Material Flow... 1 Geographical Locations of Petrochemical Complexes... 2 Production Capacity... 3 Ethylene Production... 4 Export/ Import Balance as Ethylene Equivalent... 5 The Members of the Association... 6~8 42

44 Material Flow (2017) (Unit: 1,000 KL) (Unit:1,000 ton) Low-density Polyethylene 1,770 (Including LLDPE, EVA) Ethylene 6,530 (30) High-density Polyethylene 885 Vinyl Chloride Monomer 2,723 Ethylene Oxide 946 Propylene 5,459 (19) Acetaldehyde 87 Styrene Monomer 2,085 (Includes propylene from refinery gas) Others n.a. Naphtha Supply Polypropylene 2,506 Domestic 18,758 Imports 27,057 Total 45,815 (Cracking) C4 Fraction 2,796 (11) Acrylonitrile 435 Propylene Oxide 417 Phenol 676 LPG Heavy Condensate Gas Oil Pyrolysis Gasoline 4,544(20) IPA 230 Octanol 217 Others n.a. Others (20) Butadiene 916 Others n.a. (Extraction) Aromatics Benzene 4,379 Toluene 2,152 Xylene 6,779 (Including coaltar aromatics) 1 Others n.a. 43

45 Geographical Locations of Petrochemical Complexes Mitsubishi Chemical Corp. (Yokkaichi) Tosoh Corp. (Yokkaichi) Mitsui Chemicals, Inc. (Osaka) Asahi Kasei Mitsubishi Chemical Ethylene Corp. (Mizushima) Mitsui Chemicals, Inc. (Iwakuni Otake) Idemitsu Kosan Co., Ltd. (Shunan) Showa Denko K. K. (Oita) JX Nippon Oil & Energy Corp. (Kawasaki) Tonen Chemical Corp. (Kawasaki) Maruzen Petrochemical Co., Ltd. ( Ichihara) Mitsui Chemicals, Inc. (Ichihara) Idemitsu Kosan Co., Ltd. (Chiba) Sumitomo Chemical Co., Ltd. (Anegasaki Sodegaura) Mitsubishi Chemical Corp. (Kashima) 2 44

46 Production Capacity (as of December, 2017) Product Capacity Note (in 1,000 metric tons) Ethylene Benzene Toluene Xylene Para-xylene Low-density Polyethylene High-density Polyethylene Polypropylene Polystyrene Polyvinyl Chloride 6,155 5,741 2,680 8,803 3,682 2,233 1,142 2, ,929 Including LLDPE, EVA GP HI Ethylene Oxide Acrylonitrile Synthetic Rubbers Styrene Monomer SBR 598 BR 295 1,949 Vinyl Chloride Monomer Acetaldehyde 2,

47 Ethylene Production (in 1,000 metric tons) Year Production Annual Growth (%) (in 1,000 metric tons) 8, , , ,614 7,618 7,570 7, , , ,361 7,367 7, , ,152 7, , ,883 7, , , , ,882 6,913 6,689 6,696 6,647 6, , , ,145 6, , , , , , , , ,530 4 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 ' ,000

48 Export/Import Balance as Ethylene Equivalent Year Export (A) Import (B) Net Export (A-B) (in 1,000 metric tons) Export Ratio (%) Import Ratio (%) 05 2, , ,000 2,800 2,600 Export 2,940 (in 1,000 metric tons) 2, , , ,400 2,391 2,435 2, , , , , ,200 2,000 2,270 2,294 2,193 1,910 2,193 2,235 2, , , ,800 1, , , , , , , , , , , , , , , , , ,200 1, Import , , '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 47