Amid shrinking domestic demand and growing output in the Middle East and China, Mitsubishi Chemical Holdings Corp. and Asahi Kasei Corp. have agreed to shut down one of their two ethylene facilities at a complex in Okayama Prefecture in spring 2016, the firms said Friday.
The firms have been jointly running the facilities at the complex in Kurashiki since 2011. Ethylene is a basic ingredient in petrochemical products.
“We concluded it is necessary to eliminate overcapacity to reinforce Japan’s petrochemical business,” Yuji Kobayashi, president of Asahi Kasei Chemicals Corp., the Asahi Kasei unit for ethylene operations, told a press conference.
The suspension is expected to cut fixed costs by ¥10 billion annually.
Mitsubishi Chemical and Asahi Kasei will decide the details of the suspension plan by spring 2014, including which petrochemical products will be subject to lower production and how to deal with affected workers.
Mitsubishi Chemical Corp., a Mitsubishi Chemical Holdings unit, will scrap an ethylene production facility in Kamisu, Ibaraki Prefecture, in 2014.
Elsewhere in the country, Sumitomo Chemical Co. plans to suspend an ethylene production facility in Ichihara, Chiba Prefecture, in 2015.
Even following the suspension of the Kurashiki facility, the country’s total ethylene production capacity will remain above 6 million tons annually, well above estimated domestic demand of 5 million tons. At present, total capacity is at 7.21 million tons.
According to the Japan Petrochemical Industry Association, ethylene output in Japan in 2012 was at an 18-year low of 6.14 million tons.