) International Polyolefins Conference (Feb. 21-24, Houston, TX), that while the country's petrochemical output accounted for roughly 15% of global production 15-20 years ago, it currently contributes 10%. While capacity has stayed the same for the last 10-15 years, domestic demand has shrunk, going from 5.7 million tonnes in 1999-2000 to 5.3 million tonnes in 2008, a decline of 3%-4% over the last decade. "This 2 million-tonne gap between domestic demand and production is a really big problem in Japan," Wakabayashi told the conference.

At this point in time, there are 15 ethylene production sites in Japan run by 10 companies, with the facilities "old and small" compared to new installations in Korea and Saudi Arabia, according to Wakabayashi. Korea operates 11 plants with an average age of 20 years and average capacity of 610,000 tonnes/year. In Saudi Arabia, meanwhile, there are eight plants, with average capacity of 850,000 tonnes/year. Japan's facilities, which date back to the '50s and '60s (first site built in 1958), are also at a feedstock disadvantage, with Japanese ethylene being 94% naphtha derived, according to a 2008 estimate.

In addition to weakening domestic demand, the Japanese polyolefin industry must also confront stricter control of emissions, particularly carbon dioxide. Manufacturing accounts for 36% of emissions in Japan, with chemicals representing 20% of that number so that 7.5% of carbon dioxide emissions in Japan are produced in the manufacture of chemicals. Going forward, the Japanese president has committed to a 25% reduction in carbon dioxide from 1990 levels. "[Carbon dioxide reduction] is an ongoing burden or issue the chemical industry must face over the next five to 10 years," Wakabayashi said.

To counteract some of the competitive disadvantages of its domestic production facilities, Japan has begun to invest overseas, including in Saudi Arabia, where it has partnered on the production of methanol, ethylene, ethylene glycol, PE, and PP. Japanese firms also have partners in China and India for the manufacture of phenol, acetone, and terephthalic acid, as well as PP compounding.

Closer to home, Wakabayashi said that rationalization at individual plants does not equal optimization of complex as a whole. Part of the problem in Japan for its ethylene producers has been the shuttering of downstream derivative companies, including resin makers, with one-third having shut down since the '90s. In the future, Wakabayashi believes the number of Japanese ethylene plants will drop from 10 to five or six, with some units combining. This consolidation is already under way in the Chiba region, which has five crackers.—[email protected]