Mitsubishi Chemical says it will close permanently the company's No. 1 naphtha cracker at Kashima, Japan, citing an expected weakening in demand. The intended closure, scheduled by 2014, forms part of a wider reorganization of basic petrochemicals production at the Kashima complex. The plans also include permanent closure of the site's No. 1 benzene unit. The overall program is expected to cost ¥9.8 billion ($123 million) and generate annualized fixed-cost savings of ¥4 billion.

The No. 1 naphtha cracker has capacity for about 392,000 m.t./year of ethylene. It accounts for about 30% of the company's total ethylene output and an estimated 5% of Japan's combined ethylene production. Mitsubishi says its No. 1 benzene plant has a capacity of 90,000 m.t./year. The company has about 410,000 m.t./year of benzene capacity in total at Kashima, IHS Chemical says.

Mitsubishi, meanwhile, will expand its No. 2 naphtha cracker at Kashima by about 50,000 m.t./year as part of the reorganization. The No. 2 cracker currently has capacity for about 489,000 m.t./year of ethylene. Mitsubishi also says it will "install facilities" to maintain operations at the Kashima site's olefins conversion unit, which has capacity for 150,000 m.t./year of propylene. All of these measures are due to be completed by the end of a planned maintenance turnaround in 2013. The restructuring "will bring us a high steam cracker operating rate even in a low-demand business environment," Mitsubishi says.

The reorganization reflects a shift by Mitsubishi and the rest of Japan's petrochemical industry during the last three years toward "high-performance and high added-value" products, the company says. "In the domestic petrochemical industry, there has been a rapid shift recently from general-purpose products to high-performance and high added-value products under the influence of expansions of large-scale production facilities in the Middle East, increasing supply capacity of petrochemical products in China, and the emergence of shale gas mainly in North America," Mitsubishi says.

Mitsubishi and Asahi Kasei jointly established last year a new entity, Nishi Nippon Ethylene, as part of an in-depth study to integrate and unify the companies' steam cracker operations. The study is continuing, Mitsubishi says.

Mitsubishi says it produces a range of downstream petrochemical products at Kashima. They include ethylene oxide and ethylene glycol, low-density polyethylene and linear low-density polyethylene, polypropylene, and styrene. The company has one other ethylene plant in Japan, at Mizushima.

Copyright 2012 Chemical Week. All Rights Reserved.

(Originally published June 11, 2012, in Chemical Week.)