The Current Situation and Recent Trends in Chemical

Industries

4th October 2018Material Industries Division,

METI

1. Trends of Demands in Japanese Chemical Industry

2. Outlook of Supply and Demand in Petrochemical Products, and Chemical Trade

3. Issues in Chemical Industry

1

Contents

1-1 Production Trends in Ethylene Derivatives

(Source: Monthly Statistical Report of Japan Petrochemical Industry Association)

Details of Production Amount of Ethylene Derivatives as of Ethylene (2016)

Monthly Transition in Production of Ethylene Derivatives(Thousand Tons)

2

(Source: Future Trend in Demand and Supply of Petrochemical Products in the World, Fiscal Year 2017 Edition, METI)

0.0

50.0

100.0

150.0

200.0

250.0

LD

HD

PVC

EG

SM

LDPE29%

その他

24%

HDPE15%

PVC14%

SM10%

EG7%

Details in production amount of ethylene derivatives in terms of ethylene is the same as the previous year.

In order to satisfy the steadily increasing domestic demands, shipment of ethylene derivatives is mainly concentrated on domestic market, which in turn results in reduced export of the respective products.

Others

1-2 Production Trends in Propylene Derivatives

3

Details of Production Amount of Propylene Derivatives as

Propylene（2016）

Monthly Transition in Production of Propylene Derivatives

ポリプロピレン

58%

アクリロニトリル10%

その他

32%

0

50

100

150

200

250

PPAN

(Thousand ton)

Domestic demands to polypropylene has been steady. Domestic products have tended to suffer in shortages, and imports of resin and polypropylene products have been increased.

Acrylonitrile, the raw material for ABS resin and synthetic fibers, has been constantly produced due to positive market conditions.

(Source: Future Trend in Demand and Supply of Petrochemical Products in the World, Fiscal Year 2017 Edition, METI)

(Source: Monthly Statistical Report of Japan Petrochemical Industry Association)

Others

Polypropylene

Acrylonitrile

1-3 Overviewing Profit System of Japanese Chemical Industry

Sales amount of fine chemicals products steadily increased to reach at the same level as that of basic chemical products.

Fine chemicals products have surpassed the basic chemicals products in terms of operating income.

※Source reports by 30 major chemical companies

Operating IncomeSales

4

Trend of Sales by Segments Trend of Operating Income by SegmentsBillion yen Billion yen

basic chemicals

fine chemicals

Othersbasic chemicals

fine chemicals

Others

2-1 Trend of Global Demand in Petrochemical Products (Prediction in 2022)

Unit：Million ton

Others, 18.8 Others, 21.5 Others, 24.4 Others, 25.8

China, 30.9 China, 40.0

China, 51.1 China, 57.1 Japan, 4.8 Japan, 4.7

Japan, 4.8 Japan, 4.8

Other Asia, 19.1

Other Asia, 22.5

Other Asia, 26.5 Other Asia, 28.4

Europe, 20.8

Europe, 22.0

Europe, 22.7 Europe, 23.1

Middle East, 8.4

Middle East, 9.4

Middle East, 11.1 Middle East, 12.1

US, 21.0

US, 22.3

US, 24.7 US, 26.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

2012 2016 2020 2022

5※Source: METI

Annual growth in global average demand of petrochemical products between 2017 and 2022 is predicted as 3.7% in terms of ethylene.

The growths of major nations and regions are predicted respectively as 6.0% in China, 4.2% in Middle-East, and 2.7% in the United States.

Middle East

Latin America

North America

Oceania

2-2 Global Situation on Supply and Demand Balance as Ethylene

6

AsiaChina

CIS

World

Africa

EU

-13,

701

-16,

353

-24,

596

-27

-611

2,13

0

-3,4

74

-1,1

51

-2,5

20

-7,3

44

-10,

607

-16,

467

-529

-368

-405

9,93

3

17,7

80

20,7

41

-1,2

60

-2,9

71

-4,1

90

-2,1

80

-2,2

92

-3,2

81

6,01

3

7,79

8

12,9

90

1,13

2

7,57

9

8,99

9

2009

2016

2022

Global supply and demand balance of ethylene derivatives tends to expand in excess supply.

In regional aspects, north America and Middle East tend to excess in supply while other regions tend to expand in demand.

Unit：thousand ton※Source: METI

China, 18%

Korea, 6%

Chinese Thaipei, 3%

EU, 29%

US, 16%

Thailand, 5%

Singapore, 3%

Indonesia, 3%

Others, 17%

78,282Million $（2017）

2-3 Chemical Trade in Japan

Export Import（2016）

To All World：81,131M$To India： 1,603 M$

7

（2016）From All World：75,419M$From India：1,064M$

（2017年）From All World：78,282M$From India：940M$

China, 26%

Korea, 13%

Chinese Taipei, 10%EU, 10%

US, 13%

Hong Kong, 4%

Thailand, 4%

Viet Nam, 3%

Indonesia, 2%

Singapore, 2%

India, 2%

Others, 11%

89,344 Million $（2017）

（2017）To All World：89,344M$To India： 1,898M$

Source：Trade Statistics of Japan (HS28-HS40)

Total exports and imports reached a record, due to global and domestic economic situation.

2-4 Chemical Trade between Japan and India

8

About 60% of exports is organic chemicals and plastic products. About 60% of imports is organic chemicals.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

mill

ion

Japan → IndiaChemical Export total : 1,898 million$

(2017)

Inorganic Chemicals Organic Chemicals

Miscellaneous chemical products Plastics

Rubber Others

0

200

400

600

800

1,000

1,200

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

mill

ion

India → JapanChemical Import total : 940 millions$

(2017)

Organic Chemicals Pharmaceuticals Dyes & Colours

Miscellaneous Plastics Others

2-5 Make in India Examples by Japanese Companies

9

Company’s name Established year

Products Locations

1 Otsuka Chemical (India) Pvt. Ltd. 2006 Pharmaceutical intermediates Gurgaon

2 Kansai Nerolac Paints Ltd. 1986 Paint Mumbai, Punjab, Gujarat

3 Sumitomo Chemical India Private Limited 2000 Pesticide, Living Environment Related Products, Feed additives

Mumbai

4 Taiyo Nippon Sanso K-Air India Pvt. Ltd. 2010 Industrial gas Pune

5 Taoka chemical India Pvt. Ltd. 2002 Adhesive Chennai

6 Takasago International (India) Pvt. Ltd. 2000 Odoriferous Substances Chennai

7 DIC India Ltd. N/A Printing ink Noida

8 TOYO INK INDIA PVT. LTD. 2006 Printing ink, Gravure ink Noida, Bharuch

9 Toray Kusumgar Advanced Textile Private Limited

2014 Base fabric for air bag Sarigam(Gujarat)

10 MITSUI PRIME ADVANCED COMPOSITES INDIA, PVT. LTD.

2007 Polypropylene compound Neemrana(Rajasthan)

11 Vithal Castor Polyols Pvt. Ltd.(Mitsui Chemical)

2013 Bio-polyol Mumbai

12 Mytex Polymers India Pvt. Ltd.(Mitsubishi Chemical)

N/A Polypropylene compound Gurgaon

10

Source：J.R.Jambeck et al., Science 13 February 2015 pp.768-771

(Ten Thousand Tons/Year)

1st China 132-3532nd Indonesia 48-1293rd Philippines 28-754th Viet Nam 28-735th Sri Lanka 24-64:20th US 4-11:30th Japan 2-6

J. R. Jambeck has publicly released the estimated amount of plastic litter being runoff from land to ocean by countries referring to individual population density and economic circumstance. It has been found that China and Southeast Asian countries have took the first to the fourth places.

3-1 Volume of Runoff Plastics in the Marine Environment

Resin ProductionAmount10.75

Million Tons

Domestic Resin Consumption Amount

9.80 Million Tons

Export and Import of Resin and Plastic Products and the

Like

Loss in Production and Process and the

Like

Usage(Discharge Amount Calculated from the Discharge Model)

Amount of TotalPlastic Waste Discharge

8.99Million Tons

Material Recycle2.06 Million Tons

23%

Chemical Recycle※１0.36 Million Tons

4%

Energy Recovery※２5.16 Million Tons

57%

Incineration0.80 Million Tons

9%

Utilized Plastic Waste7.59

Million Tons84%

※1 Chemical Recycle：Materials for Blast Furnace and Coke Oven, Gasification Melting Furnaces, and the Like※2 Energy Recovery：Solid Fuel, Cement Raw Fuel, (Electric) Power Incineration, and Heat Incineration Using Thermal Recycle

＜Material flow diagram on this page is prepared by Plastic Waste Management Institute and Adjusted by METI＞

Reclaimed0.60 Million Tons

7%

Manufacture and Process Discharge Process and

Disposal

Proportion of Direct Disposal is 7% to the Entire Emission

11

3-2 Current Situation in Plastic Recycling in Japan (2016)

3-3 Efforts on Preventing Outflow of Resin Pellets

12

The Japan Plastics Industry Federation has formulated “Manual for Preventing Outflow of Resin Pellets” as an activity for preventing resin pellets outflow, and conducting a follow-up investigation while inviting member companies to conduct prevention activities (since 1992).

Signing on the “Declaration of the Global Plastics Associations for Solution on Marine Litter” (2011).

In 2017, the scope of the activities has expanded to preventing plastic products. Invitation is further extended to chemical manufacturers and relevant organizations to sign on “Declared Activities toward Solving Plastic Marine Litter Problem” (37 companies and organizations has signed as of August 2018).

Source: the Japan Plastics Industry Federation Source: the Japan Plastics Industry Federation

＜Created in 1993> ＜ Created in 2002＞

3-4 Establishment of Japan Initiative for Marine Environment (JaIME)

＜Members＞The activities are being expanded to include plastic users as member companies and organizations, with the 22 founders and directorate companies of Japan Chemical Industry Association as the core member.

＜Plans for Fiscal Year 2018＞1. Organize and Output Information2. Respond to Domestic Situation3. Conduct Cooperative Efforts with Asian Nations

Support Improvement of Managing Plastic Wastes in Emerging Asian Nations4. Accumulate Scientific Knowledge

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The five Japanese relevant industrial organizations, that are, Japan Chemical Industry Association, Japan Plastics Industry Federation, Plastic Management Research Association, Japan Petrochemical Industry Association, and Vinyl Environmental Council, have established JaIME on 7th September 2018, a council which is responsible to cooperatively take care of the marine plastic.

Signing on the “Declaration of the Global Plastics Associations for Solution on Marine Litter” (2011).

In 2017, the scope of the activities has expanded to preventing plastic products. Invitation is further extended to chemical manufacturers and relevant organizations to sign on “Declared Activities toward Solving Plastic Marine Litter” (the establishment prospectus, March 2018).

3-5-1 Case Examples - Companies’ Initiatives- System Innovation under Cooperation with Society -Company Name Initiative Summary

Kao Corporation

RecyCreation (Verification Project)Collect used refill packs of detergents and shampoos, and process the collected refill packs into recyclable resins through collaborations with municipalities and partner companies (“bricks were manufactured in the verification test”), then utilize the recyclable resins in local areas which have cooperated in collecting.

Used refill packs Cutting/cleaning Pelletizing Recycled into plastic building blocks that can be assembled/reused

Source: https://www.kao.com/global/en/news/2018/20180327-001/

14

Company Name Initiative Summary

SHOWA DENKO K.K.

Manufacture ammonia and conversion into hydrogen from plastic waste, and utilize hydrogen at fuel cells in a hotel and a hydrogen station.

3-5-2 Case Examples - Companies’ Initiatives- Initiative on Chemical Recycle of Disposed Plastics and Low-Carbon Hydrogen Society -

・liquefied ammonia ”ECOANN®” obtained by recycling used for plastic containers and packaging

・Electricity and hot water are supplied by using a pure hydrogen fuel cell installed in a hotel. Hydrogen is also utilized at a facility as hydrogen stations (collaboration with Kawasaki City, Kanagawa).

15

3-5-3 Case Examples - Companies’ Initiatives- Developing New Marine Degradable Material -Company Name Initiative Summary

KANEKACORPORATION

Realization of mass production of biodegradable plastics produced with microorganisms as vegetable oil to be the raw material.In contrast to the conventional biodegradable plastics, the newly developed biodegradable plastic, which is biodegradable in marine, can be used for wide plastic utilization including soft packages. (Degradability in marine has received an oversea third party certification).

Biodegradable Plastic Production(KANEKA CORPORATION)

Difference in Lifecycle between the Biodegradable Plastics and the Conventional PlasticsBiodegradable Plastics

Conventional Plastics

Vegetable Oil

Bioplastics

Polymer Produced by Microorganisms

KANEKA Biopolymer PHBH

Energy Saving

Sustainable

Highly Functional

Greenhouse Gases

Plastic Products

Fossil Energy Resource Such As Oil

Plastic ProductsAtmospher

e Decomposed by Microorganisms

Consumed by Plants

Microorganisms Produce Polymers

Plants

[Cycle]

[Process with No Cycle] Incin

e-ration

Reclam-ation

16

Name of Organization Initiative Summary

The Council for PET Bottle Recycling

The Council has formulated “Voluntary Design Guidelines for Designated PET Bottles" domestically manufactured, which specify rules on bottles, labels, caps to become easily recyclable containers. Resource value of used PET bottles increases, because the domestic business operators manufacture PET bottles which comply with the requirement specified in the Voluntary Design Guidelines.

3-5-4 Case Example - Initiative for PET Bottle Recycling- Efforts Toward Improved Economics in Recycling -

(PE/PP = Specific gravity less than 1.0 and floats in water)1998 Aluminum closures prohibitedBottle Bodies ⇒ PET only/clear and colorless1998 Base cups basically prohibited2001 Bottles with direct printing or

colored bottles prohibited

1994 PVC prohibited (Prevention of color change in recycled material)

1995 Glued paper label prohibited1998 Aluminum foil laminate prohibited

Cap ⇒ Plastic caps

Labels ⇒ Easily removed by hand

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機密性２

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機密性２

Material: “Quarterly Estimates of GDP”, Cabinet Office, Government of Japan

Reference1-1 Domestic Macroeconomic Condition

Rate of Change in Respective Demand Components（Actual）

Compared to the Previous Period after Seasonal Adjustment. Brackets () Indicate Contribution to GDP in Percentages (%)

（％）

1.20.9

0.8

▲0.0

1.0

▲1.8

▲0.0

0.6

1.5

▲0.1

0.1

▲0.4

0.80.2

0.30.20.7 0.5

0.6

0.2

▲0.2

▲5

▲4

▲3

▲2

▲1

＋0

＋1

＋2

＋3

1-3

4-6

7-9

10-12

1-3

4-6

7-9

10-12

1-3

4-6

7-9

10-12

1-3

4-6

7-9

10-12

1-3

4-6

7-9

10-12

1-3

4-6

13 14 15 16 17 18

消費住宅設備在庫公需外需実質GDP

Public demand

Transition of Contribution of Real GDP (Compared to the Previous Period)

Real GDP growth in 2017 (after seasonal adjustment) is ＋1.6％. In 2018, the GDP annual growth rate in the first quarter period was

▲0.9％, but it recovered to ＋1.9％ in the second quarter period.

2016 2017

①

②

③

④

⑤

⑥

⑦

⑧

⑨

⑩

⑪

⑫

⑬

2016 2017

Consumption

Housing

Capital

Stockpile

Overseas demand

Real GDP

19

機密性２

20

Reference1-2: Domestic Macroeconomic Condition

① 実質GDP（年率）Real GDP (Annual Rate)② 内需寄与度 Domestic Demand③ 外需寄与度 Contribution of Overseas Demand④ 個人消費 Personal Consumption⑤ 住宅投資 Housing Investment⑥ 設備投資 Capital⑦ 政府消費 Government Consumption⑧ 公共投資 Public Investment⑨ 在庫（寄与度）Stockpile (Contribution)⑩ 輸出 Export⑪ 輸入 Import⑫ GDPデフレータ GDP Deflator⑬ 名目GDP Nominal GDP

595.5

560.2

496.7

95.0% 95.5%

93.0%

40%

50%

60%

70%

80%

90%

100%

300

350

400

450

500

550

600

650

700

750

16/1 3 5 7 9 11 17/1 3 5 7 9 11 18/1 3 5 7

Reference2 Transition in Running Rates of Japanese Ethylene Center

(Surveyed by METI) ※The Denominator at the Time of Calculation Does Not Include Plants Which were Shutdown or Suspended of Operation Due to Periodic Maintenance or Disaster 21

Production Amount (Unit: Thousand Tons)

Ethylene Production Amount

Running RateRunning Rate（％）

Asahi Kasei Corporation (Mizushima Plant)

Shutdown in February 2016

Running rate of domestic ethylene centers has maintained high due to business reformation of respective ethylene center companies and upturn of market conditions. The operating incomes of the companies have been favorable.

High running rate of 95% or above was kept continuously since November 2015 until June 2018. The ethylene centers were engaged into the full-capacity operation for 33 months.