Japan Chemical Trading Blog

The latest chemical trading industry insights from Japan, Asia and the world, reported by the President of Daishin Corporation, Masa Oguchi.


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Masa Oguchi
President, Daishin Corporation
Born in Nara Prefecture, Japan, in 1973. Currently lives in Osaka.

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Mitsui Chemicals Acquires Eyewear Lens Business from Corning

On May 20, Mitsui Chemicals announced “it had acquired the business rights, patents, and trademark rights of the eyewear photochromic lens material business from Corning, a major American glass manufacturer.”

With photochromic lens, photochromic materials knead into the lens changes its color shade in response to ultraviolet radiation. Recently, I started using glasses that incorporate this technology. They are very convenient as I can use them as an ordinary transparent pair of glasses indoors and as a pair of sunglasses outdoors.

I hope the company to develop a next-generation eyewear lens by combining the eyewear lens material technology in which the company already has strengths with the photochromic technology.

Among major Japanese chemical companies, Mitsui Chemicals has a tendency for attaching too much importance to the petrochemical industry. Therefore, I expect they will now expand their healthcare materials business.

Mitsui Chemicals Acquires Eyewear Lens Business from Corning

On May 20, Mitsui Chemicals announced “it had acquired the business rights, patents, and trademark rights of the eyewear photochromic lens material business from Corning, a major American glass manufacturer.”

With photochromic lens, photochromic materials knead into the lens changes its color shade in response to ultraviolet radiation. Recently, I started using glasses that incorporate this technology. They are very convenient as I can use them as an ordinary transparent pair of glasses indoors and as a pair of sunglasses outdoors.

I hope the company to develop a next-generation eyewear lens by combining the eyewear lens material technology in which the company already has strengths with the photochromic technology.

Among major Japanese chemical companies, Mitsui Chemicals has a tendency for attaching too much importance to the petrochemical industry. Therefore, I expect they will now expand their healthcare materials business.

Financial Results of Chemical Companies in Japan

All of the major 6 chemical companies recorded sales increases in the previous fiscal year ended March 31, 2014 compared with the second previous fiscal year. Sales and operating profit of each company are as follows:

 

 Shin-Etsu ChemicalAsahi Kasei Sumitomo ChemicalMitsubishi Chemical HDTosohMitsui Chemicals
Sales Q1 USD2.71BUSD4.30BUSD5.16BUSD7.81BUSD1.75BUSD3.63B
Sales Q2USD3.01BUSD4.89BUSD5.35BUSD8.30BUSD1.91BUSD3.69B
Sales Q3USD3.00BUSD4.71BUSD5.56BUSD8.70BUSD1.95BUSD3.77B
Sales Q4USD2.94BUSD5.08BUSD6.38BUSD10.17BUSD2.12BUSD4.57B
Sales Total USD11.66BUSD18.98BUSD22.44BUSD34.99BUSD7.72BUSD15.66B
Profit Q1USD455MUSD283MUSD246MUSD235MUSD66MUSD93M
Profit Q2USD466MUSD459MUSD217MUSD278MUSD116MUSD17M
Profit Q3USD427MUSD355MUSD249MUSD364MUSD106MUSD41M
Profit Q4USD388MUSD335MUSD296MUSD266MUSD126MUSD98M
Profit Total USD1,738MUSD1,433MUSD1,008MUSD1,104MUSD415MUSD249M

Sources: Website of each company

Remarks:

1) Calculated by using exchnage rate of USD1.00=JPY100
2) Profit is operating profit before interest and taxes.
3) Fisical Year from April 2013 to March 2014
Q1 = from April 2013 to June 2013
Q2 = from July 2013 to September 2013
Q3 = from October 2013 to December 2013
Q4 = from January 2014 to March 2014

Financial Results of Chemical Companies in Japan

All of the major 6 chemical companies recorded sales increases in the previous fiscal year ended March 31, 2014 compared with the second previous fiscal year. Sales and operating profit of each company are as follows:

 

 Shin-Etsu ChemicalAsahi Kasei Sumitomo ChemicalMitsubishi Chemical HDTosohMitsui Chemicals
Sales Q1 USD2.71BUSD4.30BUSD5.16BUSD7.81BUSD1.75BUSD3.63B
Sales Q2USD3.01BUSD4.89BUSD5.35BUSD8.30BUSD1.91BUSD3.69B
Sales Q3USD3.00BUSD4.71BUSD5.56BUSD8.70BUSD1.95BUSD3.77B
Sales Q4USD2.94BUSD5.08BUSD6.38BUSD10.17BUSD2.12BUSD4.57B
Sales Total USD11.66BUSD18.98BUSD22.44BUSD34.99BUSD7.72BUSD15.66B
Profit Q1USD455MUSD283MUSD246MUSD235MUSD66MUSD93M
Profit Q2USD466MUSD459MUSD217MUSD278MUSD116MUSD17M
Profit Q3USD427MUSD355MUSD249MUSD364MUSD106MUSD41M
Profit Q4USD388MUSD335MUSD296MUSD266MUSD126MUSD98M
Profit Total USD1,738MUSD1,433MUSD1,008MUSD1,104MUSD415MUSD249M

Sources: Website of each company

Remarks:

1) Calculated by using exchnage rate of USD1.00=JPY100
2) Profit is operating profit before interest and taxes.
3) Fisical Year from April 2013 to March 2014
Q1 = from April 2013 to June 2013
Q2 = from July 2013 to September 2013
Q3 = from October 2013 to December 2013
Q4 = from January 2014 to March 2014

Mitsubishi Chemical Holdings to Acquire Controlling Shares of Taiyo Nippon Sanso

According to the May 13 announcement of Mitsubishi Chemical Holdings, the company and Taiyo Nippon Sanso, one of the major industrial gas companies in Japan, agreed to make a tender offer for 51% shares of the latter by early November.

Mitsubishi Chemical Holdings is a comprehensive chemical and a holding company of Mitsubishi Group. The group also owns Mitsubishi Chemical, Mitsubishi Tanabe Pharma, Mitsubishi Plastics and Mitsubishi Rayon. It was established as a joint holding company of Mitsubishi Chemical and Mitsubishi Pharma in 2005.

The financial results for the previous fiscal year (April 2013 – March 2014) announced on May 12 showed a 13% sales increase from the second previous fiscal year (April 2012 – March 2013) to 3.5 trillion yen (approx. 35 billion dollar), and the operating profit of its core business increased 22% from the second previous fiscal year (April 2012 – March 2013) to 110 billion yen (approx. 1.1 billion dollars).

Taiyo Nippon Sanso is the largest industrial gas company in Japan, holding 40% of the domestic market share. It changed the trade name to the current one when Nippon Sanso and Taiyo Toyo Sanso merged in 2004. Taiyo Nippon Sanso especially outperforms in the semi-conductor business. The financial results for the previous fiscal year (April 2013 – March 2014) of the company announced on May 13 marked a 12% sales increase over the second previous fiscal year (April 2012 – March 2013) to 520 billion yen (approx. 5.2 billion dollar), and a 27% increase to 31.4 billion yen (approx. 314 million dollars) in the operating profit.

Though Mitsubishi Chemical Holdings is the largest chemical manufacturer in Japan, its president Mr. Kobayashi has a strong sense of crisis for the future of the petrochemical business and is hurrying on to restructure the business: he discontinued one of ethylene plants in Kashima Chemical Complex in early May.

Taiyo Nippon Sanso, aiming at the gas demand related to shale gas, which is expected to develop, has already installed many air separation plants in the U.S. Mitsubishi plans to construct a MMA plant using ethylene from shale gas in the U.S. and start the operation around 2017. Mitsubishi can acquire the nitrogen necessary to produce shale gas from Taiyo Nippon Sanso.

On the other hand, by coming under the control of Mitsubishi Chemical Holdings, which has capital strength, the unique businesses of Taiyo Nippon Sanso, such as MOCVD, will increase their opportunities to make a leap forward.

I expect a brilliant transformation of Mitsubishi Chemical Holdings like that of the former photographic film maker, Fujifilm.

Mitsubishi Chemical Holdings to Acquire Controlling Shares of Taiyo Nippon Sanso

According to the May 13 announcement of Mitsubishi Chemical Holdings, the company and Taiyo Nippon Sanso, one of the major industrial gas companies in Japan, agreed to make a tender offer for 51% shares of the latter by early November.

Mitsubishi Chemical Holdings is a comprehensive chemical and a holding company of Mitsubishi Group. The group also owns Mitsubishi Chemical, Mitsubishi Tanabe Pharma, Mitsubishi Plastics and Mitsubishi Rayon. It was established as a joint holding company of Mitsubishi Chemical and Mitsubishi Pharma in 2005.

The financial results for the previous fiscal year (April 2013 – March 2014) announced on May 12 showed a 13% sales increase from the second previous fiscal year (April 2012 – March 2013) to 3.5 trillion yen (approx. 35 billion dollar), and the operating profit of its core business increased 22% from the second previous fiscal year (April 2012 – March 2013) to 110 billion yen (approx. 1.1 billion dollars).

Taiyo Nippon Sanso is the largest industrial gas company in Japan, holding 40% of the domestic market share. It changed the trade name to the current one when Nippon Sanso and Taiyo Toyo Sanso merged in 2004. Taiyo Nippon Sanso especially outperforms in the semi-conductor business. The financial results for the previous fiscal year (April 2013 – March 2014) of the company announced on May 13 marked a 12% sales increase over the second previous fiscal year (April 2012 – March 2013) to 520 billion yen (approx. 5.2 billion dollar), and a 27% increase to 31.4 billion yen (approx. 314 million dollars) in the operating profit.

Though Mitsubishi Chemical Holdings is the largest chemical manufacturer in Japan, its president Mr. Kobayashi has a strong sense of crisis for the future of the petrochemical business and is hurrying on to restructure the business: he discontinued one of ethylene plants in Kashima Chemical Complex in early May.

Taiyo Nippon Sanso, aiming at the gas demand related to shale gas, which is expected to develop, has already installed many air separation plants in the U.S. Mitsubishi plans to construct a MMA plant using ethylene from shale gas in the U.S. and start the operation around 2017. Mitsubishi can acquire the nitrogen necessary to produce shale gas from Taiyo Nippon Sanso.

On the other hand, by coming under the control of Mitsubishi Chemical Holdings, which has capital strength, the unique businesses of Taiyo Nippon Sanso, such as MOCVD, will increase their opportunities to make a leap forward.

I expect a brilliant transformation of Mitsubishi Chemical Holdings like that of the former photographic film maker, Fujifilm.

Tosoh Corporation

According to the financial results for the previous period announced on May 9, the sales of Tosoh Corporation were 772.3 billion yen (approx. 7.6 billion dollar), up 15% year-on-year from 668.5 billion yen and operating profit, profits from its core business (pre-tax), was 41.6 billion yen (approx. 408.5 million dollar), up 70% year-on-year from 24.5 billion yen.

Tosoh is a full-line Japanese chemical manufacturer, established in 1935 in Yamaguchi Prefecture as an electrolytic soda factory (the electrolytic soda industry specializes in the production of caustic soda, chlorine, and hydrogen by electrolysis of salt water). Its original name was Toyo Soda Manufacturing Co., Ltd.

The company produces caustic soda, ethylene amines, quartz materials, urethane materials, PVC, chloroprene rubber, cement, bromine compound, zirconia, ethylene, propylene, petroleum resin, PPS resin and other specialty products at its plants, which are located in Nanyo, Yamaguchi Prefecture, its place of birth, and Yokkaichi, Mie Prefecture.

PVC monomer production facilities in its Nanyo Complex whose operation had been suspended due to an accident in November 2011, resumed in 2012 and were in full operation throughout 2013, leading to an increase in shipping volume. The company’s exports have become profitable due to the depreciation of yen and the increase in the shipping volume of its specialty products. It seems that all these elements have led to the rise in the level of sales and profit.

The closing stock price (total market value) of the company as of May 9 was 247 billion yen (approx. 2.4 billion dollar), up 5.65% from the day before.

Tosoh Corporation

According to the financial results for the previous period announced on May 9, the sales of Tosoh Corporation were 772.3 billion yen (approx. 7.6 billion dollar), up 15% year-on-year from 668.5 billion yen and operating profit, profits from its core business (pre-tax), was 41.6 billion yen (approx. 408.5 million dollar), up 70% year-on-year from 24.5 billion yen.

Tosoh is a full-line Japanese chemical manufacturer, established in 1935 in Yamaguchi Prefecture as an electrolytic soda factory (the electrolytic soda industry specializes in the production of caustic soda, chlorine, and hydrogen by electrolysis of salt water). Its original name was Toyo Soda Manufacturing Co., Ltd.

The company produces caustic soda, ethylene amines, quartz materials, urethane materials, PVC, chloroprene rubber, cement, bromine compound, zirconia, ethylene, propylene, petroleum resin, PPS resin and other specialty products at its plants, which are located in Nanyo, Yamaguchi Prefecture, its place of birth, and Yokkaichi, Mie Prefecture.

PVC monomer production facilities in its Nanyo Complex whose operation had been suspended due to an accident in November 2011, resumed in 2012 and were in full operation throughout 2013, leading to an increase in shipping volume. The company’s exports have become profitable due to the depreciation of yen and the increase in the shipping volume of its specialty products. It seems that all these elements have led to the rise in the level of sales and profit.

The closing stock price (total market value) of the company as of May 9 was 247 billion yen (approx. 2.4 billion dollar), up 5.65% from the day before.

Styrene Monomer

A Nikkei Newspaper article dated May 2nd says, “Spot price for styrene monomer in East Asia is around USD1,570 to USD1,580 a ton — around USD70 down from early April.”

Styrene monomer is a flammable liquid produced by hydrogenating ethyl benzene using a catalyst and used as a raw material for synthetic resin and rubber such as polystyrene, ABS, and SBR as well as for paint materials.

The export ratio for the product is high with approximately 40% of production in Japan being exported to foreign countries including China. However, with the increase in the production capacity in China and South Korea and an economic slowdown in China, an oversupply trend is continuing.

It would be necessary for manufacturers with a production base within Japan to decrease the production amount of styrene monomer in small increments and shift the business portfolio to include a more competitive family of products while their production margin is still in the positive.

Styrene Monomer

A Nikkei Newspaper article dated May 2nd says, “Spot price for styrene monomer in East Asia is around USD1,570 to USD1,580 a ton — around USD70 down from early April.”

Styrene monomer is a flammable liquid produced by hydrogenating ethyl benzene using a catalyst and used as a raw material for synthetic resin and rubber such as polystyrene, ABS, and SBR as well as for paint materials.

The export ratio for the product is high with approximately 40% of production in Japan being exported to foreign countries including China. However, with the increase in the production capacity in China and South Korea and an economic slowdown in China, an oversupply trend is continuing.

It would be necessary for manufacturers with a production base within Japan to decrease the production amount of styrene monomer in small increments and shift the business portfolio to include a more competitive family of products while their production margin is still in the positive.

Caprolactam

On April 28, Ube Industries announced the downward revision of earnings forecast for the previous fiscal year (April, 2013 – March, 2014).

Though shipments of cement and ready-mixed concrete was buoyant thanks to robust domestic sales lead by reconstruction demands, etc., it did not offset the declining performance in the chemical products.

The slump, while the weaker yen has served as a spur to profits, shows the chemicals segment has been in a severe situation.

Caprolactam, their main product, is used as raw material for nylon.
Last year Chinese manufacturers increased production capacity for approx. 700,000 ton which is 15% of world demand, so that the prices have been faltering.

Last month Ube stopped production of caprolactam at the Sakai Factory, Osaka, which has a relatively low competitiveness among their production bases.

Caprolactam

On April 28, Ube Industries announced the downward revision of earnings forecast for the previous fiscal year (April, 2013 – March, 2014).

Though shipments of cement and ready-mixed concrete was buoyant thanks to robust domestic sales lead by reconstruction demands, etc., it did not offset the declining performance in the chemical products.

The slump, while the weaker yen has served as a spur to profits, shows the chemicals segment has been in a severe situation.

Caprolactam, their main product, is used as raw material for nylon.
Last year Chinese manufacturers increased production capacity for approx. 700,000 ton which is 15% of world demand, so that the prices have been faltering.

Last month Ube stopped production of caprolactam at the Sakai Factory, Osaka, which has a relatively low competitiveness among their production bases.

Polystyrene

According to an article of the Nikkei Newspaper dated on April 25, “price of polystyrene resin used as raw material of food containers or construction components has increased approx. 12 yen (5%) to 241 – 251 yen per kg (approx. USD2.35 – 2.45 per kg.) in Japan from the beginning of the year”.

International price of the raw material, styrene monomer, is stable. However, it becomes easier for domestic manufacturers to permeate price increase to customers as the import is losing competitive power in Japan with the background of the yen’s depreciation.
There are three manufacturers in Japan: DIC, Toyo Styrene and PS Japan.

It seems the raw material price and the exchange rate hold the key of future price trends.

Polystyrene

According to an article of the Nikkei Newspaper dated on April 25, “price of polystyrene resin used as raw material of food containers or construction components has increased approx. 12 yen (5%) to 241 – 251 yen per kg (approx. USD2.35 – 2.45 per kg.) in Japan from the beginning of the year”.

International price of the raw material, styrene monomer, is stable. However, it becomes easier for domestic manufacturers to permeate price increase to customers as the import is losing competitive power in Japan with the background of the yen’s depreciation.
There are three manufacturers in Japan: DIC, Toyo Styrene and PS Japan.

It seems the raw material price and the exchange rate hold the key of future price trends.

Indium

According to an article of Japan Metal Bulletin dated on April 15, “domestic price of low grade indium for alloy is ranging 76,000 – 81,000 yen per kg (approx. USD740 – 790 per kg.), the same as the previous week”.

Indium is a soft silver-white metal to be used for transparent conductive films for touch panels after processed into indium tin oxide (ITO), lead-free solder material, semiconductor element material, etc.

It is created as a byproduct of zinc and China is the biggest producing country. One of the dominant markets is Japan. However, its domestic demand has declined lately.

Fanya Metal Exchange in Yunnan Province, China, which is rumored to have some relationship with the Chinese Government, is said to have an inventory well over the annual demand of the world, and according to traders, domestic prices in China have been increasing again to such a price exceeding 4,500 Yuan per kg. (approx. USD720 per kg.).

Future moves of Fanya Metal Exchange, which is holding a large quantity in inventory, are attracting attention.

Indium

According to an article of Japan Metal Bulletin dated on April 15, “domestic price of low grade indium for alloy is ranging 76,000 – 81,000 yen per kg (approx. USD740 – 790 per kg.), the same as the previous week”.

Indium is a soft silver-white metal to be used for transparent conductive films for touch panels after processed into indium tin oxide (ITO), lead-free solder material, semiconductor element material, etc.

It is created as a byproduct of zinc and China is the biggest producing country. One of the dominant markets is Japan. However, its domestic demand has declined lately.

Fanya Metal Exchange in Yunnan Province, China, which is rumored to have some relationship with the Chinese Government, is said to have an inventory well over the annual demand of the world, and according to traders, domestic prices in China have been increasing again to such a price exceeding 4,500 Yuan per kg. (approx. USD720 per kg.).

Future moves of Fanya Metal Exchange, which is holding a large quantity in inventory, are attracting attention.

Shin-Etsu New Factory in Vietnam

On April 21, Shin-Etsu Chemical Co., Ltd. announced that “they were going to establish a new rare-earth magnet factory with a production capacity of 2,000 ton in Vietnam investing approx. 12 billion yen”.

This company has filed a construction license for an ethylene factory in the U.S. just last week.

Both decisions seem just like Shin-Etsu’s who has been recognized by its foresight and drastic leverage.

Although their business field is different from ours, it is a company that can be a great model that other businesses’ managements should learn from.

Shin-Etsu New Factory in Vietnam

On April 21, Shin-Etsu Chemical Co., Ltd. announced that “they were going to establish a new rare-earth magnet factory with a production capacity of 2,000 ton in Vietnam investing approx. 12 billion yen”.

This company has filed a construction license for an ethylene factory in the U.S. just last week.

Both decisions seem just like Shin-Etsu’s who has been recognized by its foresight and drastic leverage.

Although their business field is different from ours, it is a company that can be a great model that other businesses’ managements should learn from.

Sumitomo Chemical

A Nikkei Newspaper article dated April 17th says, “Sumitomo Chemical Co., Ltd. is expected to report a 210% increase year-on-year in ordinary profit to 108 billion yen (approx. USD1.08 billion) for the year’s end on March 31, 2014, with the sales increasing by 14% year-on-year to around 2.23 trillion yen (approx. USD22.3 billion).”

The operating profit of 2 billion yen (USD20 million) can be generated by the company with a 1-yen depreciation against the US dollar.
Yen weakening more than expected, an improvement in performance of Petro Rabigh, a bet-the-company equity method affiliate, and the expansion of international sales of agricultural chemicals including chemical herbicides that are showing increased sales in foreign countries evolving around the partnership with Monsanto Company in the US have all contributed to the increase in revenue.

Sumitomo Chemical is a chemical giant that is positioned second in Japan after Mitsubishi Chemical by sales and has a well-balanced segment composition including petrochemicals, electronic component materials, agricultural chemicals and drugs.

The company is also making substantial investments in Singapore and Saudi Arabia. I have high expectations for this company because they have a courageous global management style.

Sumitomo Chemical

A Nikkei Newspaper article dated April 17th says, “Sumitomo Chemical Co., Ltd. is expected to report a 210% increase year-on-year in ordinary profit to 108 billion yen (approx. USD1.08 billion) for the year’s end on March 31, 2014, with the sales increasing by 14% year-on-year to around 2.23 trillion yen (approx. USD22.3 billion).”

The operating profit of 2 billion yen (USD20 million) can be generated by the company with a 1-yen depreciation against the US dollar.
Yen weakening more than expected, an improvement in performance of Petro Rabigh, a bet-the-company equity method affiliate, and the expansion of international sales of agricultural chemicals including chemical herbicides that are showing increased sales in foreign countries evolving around the partnership with Monsanto Company in the US have all contributed to the increase in revenue.

Sumitomo Chemical is a chemical giant that is positioned second in Japan after Mitsubishi Chemical by sales and has a well-balanced segment composition including petrochemicals, electronic component materials, agricultural chemicals and drugs.

The company is also making substantial investments in Singapore and Saudi Arabia. I have high expectations for this company because they have a courageous global management style.


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