Mitsui Chemical will stop producing PTA in Japan. Why?
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Mitsui Chemicals announced on March 15 that it will close its purified terephthalic acid (PTA) plant in Otake, Iwakuni, Japan, in August 2023. In 1958, Mitsui Chemicals achieved the industrial production of terephthalic acid at its Okabe Plant in Iwakuni, using its proprietary technology. In the following years, refining processes were added and production capacity was increased. At its peak, Mitsui Chemicals produced 750,000 tons of PTA per year in Japan and exported it to other countries. Over the past decade or so, the number of PTA production facilities worldwide has increased sharply (mainly in China), leading to a decline in market prices, as well as a reduction in domestic demand in Japan. Mitsui Chemical believes that despite the reduction in its PTA production capacity and various rationalization measures taken, it is still not possible to ensure sufficient profits to sustain PTA production in Japan. According to the latest report by GlobalData, global PTA production capacity is expected to increase by 38% between 2020 and 2025, rising from 100 million tons to 140 million tons. There are about 23 factories that have been announced or are planned, mainly in Asia and the Middle East. The PTA industry has entered a period of significant new capacity additions, resulting in a supply surplus in the market. It is evident that Mitsui Chemicals’ decision to stop producing PTA in Japan is a valid measure. Currently, the annual production capacity of PTA at the Iwakuni-Ohtake plant of Mitsui Chemicals is 400,000 tons. After ceasing production, Mitsui Chemicals will maintain its existing sales system in the Japanese market by importing PTA from Thai GC-M PTA. Mitsui Chemicals holds 26% of the shares in GC-M PTA Company, while PTT Global Chemicals owns the remaining 74%. In November 2021, Mitsui Chemicals outlined in its new long-term business plan VISION2030 the intention to accelerate the restructuring of its businesses related to phenol, purified terephthalic acid, and polyurethanes within the field of basic and green materials, in order to reduce the impact of fluctuations in external markets and enhance competitiveness.
The production process of PTA is lengthy, and it requires only one type of raw material. The prices of downstream products derived from PTA are highly influenced by market conditions and raw material costs. If the entire PTA industry chain does not have sufficient capacity, it will be difficult to cope with the price fluctuations in crude oil, chemical products, and downstream PTA products in recent years. Japan built its PTA plants early on, but their scale is small, and due to the limited capacity of the domestic market, their competitiveness is far lower than that of China. Therefore, it is a wise decision for them to shut down their PTA plants; they can obtain PTA and related primary products from China. It should be noted that in previous years, a considerable number of Japanese chemical manufacturing facilities were relocated to China; there are many Japanese-owned chemical companies in the Jiangsu and Zhejiang regions, all of which are quite large in scale. Given the PTA construction projects and their scale in China, South Korea’s PTA plants will also face difficulties at some point, but Taiwan’s PTA industry will continue to exist, as its larger scale gives it much greater resilience to risks.