The situation of blocked shipping in the Strait of Hormuz continues, and many Asian countries are facing the risk of petrochemical raw material supply rupture. As a country highly dependent on energy in the Middle East, more than 90% of Japan's crude oil imports from the Middle East were interrupted, the petrochemical raw material system with naphtha as the core suffered a direct impact, ethylene and propylene production units were forced to reduce the load, synthetic resin, synthetic rubber and other products delivery generally delayed. Japan has urgently used strategic reserves and expanded supply channels on a global scale. At the same time, it has accelerated the transformation of renewable energy. The domestic chemical industry is ushering in a deep reconstruction of the raw material structure.
Naphtha supply emergency cracking unit concentrated negative reduction
Japan's petrochemical industry is highly dependent on naphtha in the Middle East. About 85% of the domestic ethylene production capacity is mainly cracked with naphtha and condensate from the Gulf region, and almost all related sources are transported through the Strait of Hormuz. With the continued obstruction of navigation in the Strait, since late March, Mitsubishi Chemical, Mitsui Chemical, Sumitomo Chemical, Uguang Xingchan and other head enterprises of naphtha to Hong Kong cargo frequent delays or even cancellation. The operating rate of cracking units in the three core petrochemical industrial clusters of Chiba, Yokri City and Shuidao dropped sharply from the original high of more than 90% to 60% to 70%, and some small units were temporarily shut down directly.
The impact of raw material shortage quickly spread to the whole industry chain, ethylene, propylene, butadiene production fell simultaneously, resulting in polyethylene, polypropylene, PVC, ABS resin and synthetic rubber products such as production capacity contraction. There is a significant supply gap in styrene-butadiene rubber and butadiene rubber required for tire manufacturing, and a number of chemical companies have issued force majeure declarations to downstream customers, reducing contract supplies by 10 to 15 per cent. In addition, high-end materials such as epoxy resin and polyimide film used in electronic packaging and circuit board manufacturing have extended the delivery cycle by more than two weeks.
After the outbreak of geopolitical conflicts, the spot price of naphtha rose by 35%, further compressing the profitability of Japanese chemical companies. Japan's Ministry of economy, Trade and Industry issued an assessment report in early April that if the strait blockade continues for more than three months, the annual loss of ethylene production may reach 1.2 million tons, close to 1/5 of the total domestic production. At present, the company's naphtha inventory can only last about 11 days, some manufacturers have used LPG instead of 10% of the cracking feed, and coordinated three tankers to choose a bypass route transport.
Multi-initiative emergency supply release reserves + global expansion of sources
After the escalation of the situation in the Middle East, the Japanese government and chemical companies quickly launched a multi-level emergency plan. Since March 16, the national and private strategic oil reserves have been officially put into operation, with a total scale of 90 million barrels, of which about 15% will be supplied to the petrochemical field, giving priority to ensuring the basic operation of cracking units. The Ministry of Economy, Trade and Industry also allowed refineries to adjust their production processes, allocate more straight-run naphtha to chemical production, and temporarily relax the standards for aromatic hydrocarbon content in gasoline to promote the preferential supply of benzene, toluene and xylene from reforming units to the chemical industry.
Japan's Ministry of Economy, Trade and Industry Crisis Adjustment Officer Hosokawa Chenghai said that if the current situation is not improved, the tight crude oil supply situation may continue, and the government will choose the opportunity to start the second round of strategic fuel reserves. Since March 16, private reserves have been released simultaneously, and wholesalers' legal inventory holdings have been temporarily reduced from 70 days to 55 days for a period of one month.
In order to fill the supply gap, Japan has significantly increased its naphtha procurement in the non-Middle East region. In April, the import volume is expected to double from the conventional 450000 thousand liters to 900000 thousand liters. Mitsui Chemical and Sumitomo Chemical restarted talks with Venezuela's National Oil Company to try to restore the supply of heavy naphtha, which requires complex pretreatment, but can alleviate some of the gap. Guangxing production increased the import of ethane and propane from the Gulf of Mexico in the United States for the transformation of the light feed of the cracking unit. Under the framework of Japan-US Alaska energy cooperation, Japan invested 25 billion yen to build a small cracking test device in Hokkaido to test the feasibility of local crude oil for chemical production. At the same time, Japan increased coal imports from Australia and Indonesia, and temporarily started some coal-to-olefins projects. Although the cost and carbon emissions are high, they are still put into use as emergency backup plans.
Promote long-term transformation to build a diversified raw material system
The supply crisis has accelerated the deep adjustment of the raw material structure of Japan's chemical industry, and enterprises have accelerated the diversified layout of raw materials. Mitsubishi Chemical announced an investment of 120 billion yen and plans to build an ethylene demonstration plant using bioethanol as raw material by 2028. Sumitomo Chemical and Uiguang Xingchan have jointly launched a chemical recycling project for waste plastics, with the goal of achieving an annual output of 100000 tons of pyrolysis oil by 2027, which will be directly used for feeding the cracking unit. The Japanese government has also included unconventional crude oil processing technology in the key areas supported by the Green Innovation Fund, including the research and development of Canadian oil sands asphalt chemical utilization and catalytic cracking to increase propylene production.
The development of renewable energy will also gradually change the carbon structure and raw material pattern of the chemical industry. The Japan Chemical Industry Association released the 2050 carbon neutral road map, clearly put forward to gradually get rid of the single dependence on the Middle East naphtha, the future will focus on biomass raw materials, recycling carbon resources, as well as the United States, Canada and other regions of ethane, propane resources, to build a more resilient raw material supply system.
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