Rising Import of Chemicals in Japan, Restraining the Growth of Domestic Production

 Japanese chemical industry is expected to benefit from the low oil prices for the next two years. However, the output of these industries is expected to fall on account of increasing exports of inexpensive products from the US and China. Chemical companies in Japan are expected to exhibit strong profit margins in the years 2016 due to low oil prices. Low oil prices reduce the conversion cost of naphtha – an oil based product in ethylene, which is a basic raw material used in the petrochemical industries to obtain products such as plastics.

 The chemical companies in Japan are expected to maintain healthy earnings for the next 2 years. However, post 2017, cheap products from countries such as China and United States would hamper the profit margins as well as output of chemical industries in Japan. Most of the companies are terminating their existing facilities due to overcapacity. For instance Sumitomo, Chemical’s closed its naphtha cracker unit in 2015 and Asahi Kasei Corporation is also planning to close one of its plant in 2016.

TechSci Research depicts that in order to compete with the global players in the market, the Japanese chemical companies should come up new and innovative products and technologies which would increase the production output.