International
imports worry Japanese petrochemical makers Sharp rise in imports of low-priced petrochemicals from U.S. puts pressure on industry constrained by high feedstock and energy costs In the U.S., Detroit's auto makers and their political allies are worried about the flood of Japanese cars entering the country. But in Japan, chemical companies and many government officials are worried about the flood of petrochemicals pouring into Japan—much of them from the U.S. True, Japan still has an overall trade surplus in chemicals. Last year, it exported an estimated $6.6 billion worth of chemicals and imported only $6.2 billion. But the resulting $400 million chemical trade surplus is less than half of what it was in 1979. And it is a mere shadow of the $1.8 billion chemical trade surplus that Japan chalked up in 1975. A big part of the explanation lies in the huge volumes of basic petro-
chemicals that are inundating Japan. It has Japanese petrochemical companies worried, because there is every indication that the import spree will not let up very soon. Saddled with high feedstock and energy costs, and hampered by weak demand in passing through necessary price increases, the Japanese are starting to look at the import problem more seriously. Some companies are considering launching joint import efforts, and coupling this approach to production cartels. Meanwhile, the government is asking an advisory council to study ways of supporting basic materials industries that are threatened by increasing volumes of low-priced imports, particularly from the U.S. The petrochemical industry is one of them. Japanese imports of U.S. chemicals have risen sharply over the past few years, increasing almost 50% in 1979 and jumping another 19% last year. Petrochemicals are in the forefront of the surge. Last year's $2 billion worth of U.S. chemicals moving into Japan is more than double what it was in 1977. These imports put added pressure on Japanese petrochemical producers, however. With ethylene produc-
Japanese imports of some major petrochemicals leaped dramatically last year Benzene Polyethylene3 Polypropylene Polystyrene Polyvinyl chloride Ethylene glycol Acrylonitrile Styrene Butadiene 0 j
20
40
Thousands of metric tons
? a Both high- and low-density. Source: Japan's Ministry of International Trade & Industry
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C&EN April 13, 1981
tion costs there running at least 30% higher than they are in the U.S., ethylene producers' recovery after last year's experience will be difficult enough. They look upon growing imports of particular petrochemicals from the U.S. as an added impediment to recovery. Some government officials, particularly within the Ministry of International Trade & Industry (MITI), are sympathetic. But some of them admit that Japan may have few options available to correct the situation. It's unlikely, for instance, that they can pressure the U.S. into voluntary export restraints on petrochemicals. The reason is that Japan is trying to encourage increased imports from the U.S. to counter the friction created by Japanese car shipments to the U.S. The government is asking a private council associated with MITI's Basic Industries Bureau to study the petrochemical import problem. One possible solution may be the approach now gaining support within the synthetic fibers industry. Some Japanese fiber companies, including the giant Toray Industries, are urging that the industry band together to import fiber raw materials on a joint basis. Importing jointly, they say, will enable them to buy large volumes of raw material at favorable prices. In addition, they are urging that production of synthetic fibers and their raw materials be consolidated. Old, inefficient plants should be scrapped and production focused in new, high-productivity units. Two fiber raw materials—acrylonitrile and ethylene glycol—are particularly thorny problems. Japanese imports of ethylene glycol, for instance, hit 80,866 metric tons last year, 42% more than in 1979. At the same time, Japanese exports of ethylene glycol plummeted 48% to 77,285 metric tons. More than half of last year's imported ethylene glycol came from the U.S. This year, Japanese producers believe that imports will rise even further as additional Canadian material starts entering the Japanese market. Indications are that between 40,000 and 50,000 metric tons of Canadian ethylene glycol will be shipped to Japan this year. Even without any
other increases, this would put total glycol imports at 120,000 to 130,000 metric tons, which is equivalent to 25% of last year's ethylene glycol production in Japan. Japanese companies also are being hurt by acrylonitrile imports. Import volume more than doubled last year to 62,946 metric tons whereas Japa nese exports shriveled from 91,818 metric tons in 1979 to 19,265 metric tons last year. As a result, Sumitomo Chemical recently became the first Japanese acrylonitrile producer to start im porting the product independently. Sumitomo reasons that, because ac rylonitrile imports probably will continue to increase anyway, it may as well take advantage of lower-priced U.S. material. Japanese producers of fiber raw materials aren't the only ones feeling the pinch from imports. The situation is the same in polymers and their monomers. Imports of styrene, vinyl chloride, ethylene dichloride, poly ethylene, and polypropylene all are problem areas for Japanese pro ducers. A report recently issued by No mura Research Institute (NRI) un derscores the extent of the problem. NRI notes that Japan imported 317,000 tons of 12 major petrochem icals in 1978. But it estimates that the
Japan's chemical trade balance dwindles $ Billions 81
Trade balance
Exports
0 I
•
•
Imports
ι
ι
ι
ι—ι—ι—ι—I
1970 71 72 73 74 75 76 77 78 79 80 Source: Japan's Ministry of International Trade & Industry
import volume of these same 12 products will rise to 965,000 metric tons by 1985 and to a huge 1.56 mil lion metric tons by 1990. In stark contrast, NRI believes that Japan's petrochemical exports in 1990 will shrink to one third its 1978 volume. In terms of ethylene equivalent, 1978 imports accounted for only 7% of Japanese deliveries. But NRI expects this share to rise to 30% by 1990. Clearly, Japanese petrochemical producers will have some serious ad justments to make. Earl Anderson, New York
Execs bullish on chemicals outlook in 2000 Optimism for the future of the chemical industry was the dominant mood at the Society of Chemical In dustry's centenary conference re cently in Cambridge. "Despite the present gloom, the next 20 years will be a very exciting and dynamic period for the industry," says William B. Duncan, SCI's pres ident and a deputy chairman of Im perial Chemical Industries. "Al though the future always looks gloomy from the bottom of a reces sion, not only may our worst fears not be realized, but our most optimistic hopes might even be surpassed." Adds Robert Malpas, president of New York City-based Halcon Inter national, "Even from the depths of the current recession, our industry looks healthy. The key is that de mand for chemicals will continue to grow." Duncan and Malpas were opening keynote speakers at the SCI confer ence, titled "The Chemical Indus try—Problems, Opportunities, Re sources." The 450 or so chemists from some 20 countries who were in the
audience represented academia, government, industry, and learned and technical societies. The industry's "ability to innovate and to adapt have served it in the past and can help it prosper in the future," Duncan notes. "The growth in the chemical industry since the Second World War has been fueled by the almost explosive burst of innovations in the period 1935 to 1950, followed by the vigorous exploitation of these new fields. A major cause of our re cent failure to maintain the impetus of growth is the lack of really novel innovations since 1950. If we are to regain our past high growth rate in relation to the economy as a whole, we have to generate more innovations that lead to new businesses." Duncan is quick to point out that "it would be misleading and far too facile to imply that innovation is the panacea for all our present ills. Moreover, innovation, by its nature, is risky, and we have to accept that not all projects we back will be win ners. "We must respond to today's
overcapacity, rising costs, and underpricing by stringent attention to rationalization and improved pro ductivity, which will increase profit ability in the short term. We need to cut the cost of production sharply to generate profitable growth in existing businesses. With the increase in feedstock and energy prices, variable costs have become increasingly im portant for basic chemicals. For the next round of major investment in 1985 to 1990, we need to develop new processes which are substantially more efficient than current ones. "There is urgent need to reduce capital costs to enable us to make the most of the limited funds available for investment. We shall require new chemical engineering technology that will enable us to design smaller, less costly plants." Looking to changes in the pattern of world chemical output during the next 10 to 20 years, Duncan foresees "a tendency for the production of the most basic chemicals to migrate to gas- and oil-rich regions, particularly the Middle East. In the very long term, the industry will have to turn again to coal as a secure, reasonably priced source of feedstock and energy. Countries with large deposits of cheap coal, such as the U.S., South Africa, and Australia, could well become important centers for production of "petrochemicals" from coal. "The changing pattern of world chemical production will lead not only to substantial growth in world trade, but to a sharpening of inter national competition," Duncan warns. "If the [present] industrialized nations are to reap the maximum benefit from this growth in world trade, they will need to export a larger proportion of high added-value chemicals. Value, not volume, must be the priority if we are to generate profitable export sales. Such business will provide the long-term growth and new employment opportunities for the late 1980's and the 1990's." Halcon's Malpas presented the Cambridge conferees with a scenario of how the global chemical industry might look in 2000. According to this scenario: • World chemical production will have doubled, or nearly so. • The bulk of it, 77%, still will be where it is now—in Eastern and Western Europe, Japan, and the U.S. • World trade in chemicals will have tripled. • Feedstocks and patterns of trade in basic chemicals will change signif icantly. April 13, 1981 C&EN
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