After the strong earthquake in Japan, the tsunami, nuclear leak, and Blizzard were linked one after another. Aftershocks continued. As the third largest energy consumer in the world, the strong earthquake in Japan also caused the world petrochemical market to face long-term “aftershocksâ€.
The international oil price bears the brunt of this, and the high oil prices caused by the unstable situation in the Middle East immediately caused a panic decline. Industry insiders said: "In the long run, Japan's current situation may have a negative impact on crude oil prices, and it is good for refiners."
However, this "good" seems to pass by Japan where the refinery suffered severe damage. Many petrochemical companies are concentrated on the east coast of Japan. They were severely damaged in the earthquake and could not resume production in the short term.
According to Reuters, Cosmo Oil’s 220,000 b/d refinery in Chiba City caught fire. Keiyo Ethylene, a subsidiary of Maruzen Petrochemicals, closed its 690,000 tons/year naphtha cracker. Nippon Oil & Energy shut down its 600,000 t/y paraxylene unit in Kashima, Ibaraki Prefecture, and the 350,000 t/y paraxylene unit in Kawasaki. In addition, there are three refineries closed under this company.
Due to the damage caused by strong earthquakes, the power supply system and the fuel transportation system were limited in capacity, and many of the remaining unrefined refineries were shut down due to insufficient power supply or potential safety hazards.
Japan is a large petrochemical producer in Asia. In terms of ethylene production, it has been stable at around 7 million tons in recent years. The output of other major petrochemical products ranks among the top in the world. The earthquake caused a large number of Japanese refineries to suspend production. It is estimated that the monthly production of naphtha will be reduced by about 1.1 million tons, and the corresponding ethylene and propylene products will be reduced to more than 300,000 tons, while the reduction in the output of benzene products will occur. It is more than 400,000 tons. Considering that the proportion of benzene-based products in Japan's exports is relatively large, the annual export volume of styrene and PX is 1.6 million tons and 2.5 million tons, respectively. Therefore, Japan’s production cuts in these areas are expected to significantly increase the import costs of downstream industries in some countries.
As the capacity of the refinery is reduced, chemical products will also rise due to scarcity.
Alan Bicker, a researcher at U.S. investment research firm, predicts that the global ethylene and downstream synthetic resin prices will be pushed up due to the closure of the factory and the reduction of supply due to the earthquake in Japan. Although crude oil prices have decreased, costs have decreased, and profit margins have increased, due to limited capacity, the upward trend in the prices of industrial products cannot be reversed.
Some analysts believe that the suspended production of Japanese oil refineries and chemical companies may significantly reduce the volume of supply to Asian markets. Affected by this, in the short-term, the prices of major raw materials such as aromatics, propylene oxide, TDI, and MDI in Asia will continue to rise.
The "aftershock" of the global petrochemical market is more than that. A few months later, Japan’s huge energy gap created by the reconstruction of the disaster area will have a more long-term impact on the world petrochemical market. According to analysis by industry insiders, the strong earthquake in Japan is a "far-reaching concern rather than a near-worry" for its domestic economy and oil market.
Japan’s nuclear leakage caused by strong earthquakes and tsunami made Japan and the world begin to re-examine the development of nuclear energy. The Japanese public’s concerns about nuclear safety have gradually increased and have affected the construction of new nuclear reactors. Japan is a large country with nuclear power. The existing nuclear reactors of 18 nuclear power plants, 54 nuclear reactors, provide nearly 30% of Japan's electricity supply, of which 14 nuclear reactors are located in hard-hit areas. As one of the largest energy companies in Japan, Tokyo Electric Power Co., Ltd., which owns the Fukushima nuclear power plant, was the hardest hit by the disaster.
At present, Japan urgently needs traditional energy such as coal, oil, and natural gas to make up for the nuclear power shortage. The International Energy Agency believes that although some Japanese fuel power plants are damaged by disasters, they can still make up for the lack of nuclear power plants. At the same time, the International Energy Agency and Barclays Bank also believe that Japan will expand its oil demand to compensate for the lack of energy production.
For a long time to come, due to the possibility of a large increase in demand, crude oil prices do not rule out the possibility of a strong rebound. The international petrochemical market may usher in more profound "aftershocks".
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