Vinyl Isocyanate Chain
The profitability of the vinyl isocyanate chain has been an issue for the Tosoh Group over the past decade. The chain’s operations have faced stiff challenges from steadily rising naphtha and other raw material prices, from substantial expansion in worldwide production capacity, and from global financial crises and the yen’s appreciation.
Most affected have been the Chlor-alkali Group’s core VCM and PVC products. In addition to measures it is taking to reduce costs and raise the competitiveness of its products, the Chlor-alkali Group seeks to increase the production and sales of its most profitable chloride line of caustic soda and related products. The expansion of VCM production capacity at the Nanyo Complex and the resultant increase in the electrolysis operating rate that enabled the greater production of caustic soda are major steps toward that goal.
Exploiting the cost-effectiveness of Tosoh’s independent electricity generation capabilities is another important way the Chlor-alkali Group is boosting the cost- competitiveness of its primary chloride and other product lines. The Chlor-alkali Group is devising methods to share Tosoh’s electricity generation capabilities among its operations at the company’s domestic factories, beginning with the Yokkaichi Complex, and at the Sakata Plant of Tohoku Tosoh Chemical Co., Ltd. Environmental taxes on fossil fuels will be implemented incrementally in Japan over the next few years, and the group’s efforts to distribute Tosoh’s electricity generation will contribute to keeping its electric power costs and its product pricing competitive.
The global VCM market is highly competitive but growing. So the Chlor-alkali Group employs a wide range of measures to reduce its VCM production costs and to strengthen its VCM marketing. The group is also considering prioritizing domestic and overseas markets where profitability is greatest amid changing exchange rates, market conditions, and technologies.
The group is focusing on products, including PVC, produced by Tosoh subsidiaries. Its plan is to encourage subsidiaries to collaborate in expanding markets in ways that ensure their profitability. The goals specifically for VCM and PVC operations are to provide stable VCM supplies to Tosoh’s PVC manufacturing subsidiaries and to maximize profits for all. This means strengthening domestic sales and tapping sales opportunities overseas in such markets as Indonesia and India. China remains a difficult market because of its increasing use of the carbide method to produce PVC.
Tosoh produces more than 35% of Japan’s VCM output and is the domestic leader in PVC resins, accounting for one-fourth of national output. Long term, VCM and PVC demand should increase in Asia, and Tosoh expects to benefit despite heightened competition at home and abroad.
Urethanes
The Chlor-alkali Group’s Urethane Division embodies the full integration of Tosoh’s and NPU’s MDI, TDI, HDI, and functional urethane operations. From a single location within Tosoh’s head office, the division’s administrative staff is examining how best to optimize Tosoh’s ample resources to further Tosoh’s urethane business strategies. This will be particularly important in view of growing volatility in the polyurethane business climate amid raw material cost fluctuations, planned capacity increases by competitors, foreign exchange rate swings, Chinese market risks, and other factors.
Regardless of operating climate, the Urethane Division will pursue efforts to cultivate high-value-added MDI offerings and to reinforce its functional urethane business to bolster Tosoh’s profitability. The division also looks to maximize production and sales to help stabilize Tosoh’s vinyl isocyanate chain and increase the company’s earnings.
Tosoh’s conversion to low-cost MDI production was mostly complete before the integration of its vinyl isocyanate chain through the tie-up with NPU’s operations. The Urethane Division is now contemplating additional MDI production capacity to increase the presence of Tosoh’s MDI products domestically and overseas.
The division also intends to reinforce its MDI export sales structure. While reviewing its sales structure in China going forward, it will attempt to reduce its reliance on China’s market. It will instead expand sales in Southeast and South Asia, which offer potential for stable demand. To reinforce its MDI marketing drive in Asia, particularly in ASEAN markets, the division has set up an MDI stockpiling base in Singapore. At the same time, the division will strive for steady sales in North America.
Strengthening sales of monomeric MDI, meanwhile, is another divisional priority. And again it will attempt to do so in part by boosting sales outside China to offset concerns about demand among that nation’s key users of monomeric MDI. The division will also promote sales of a special grade of monomeric MDI suitable for environmental issues and to meet growing demand from major footwear makers.
In addition, the Urethane Division is targeting a growing share of the overseas HDI market, primarily through expanded sales to US and European customers but also to customers elsewhere. The division also plans on expanding its sales of liquid polycarbonate diol (PCD), a highly pliable and tough raw material for polyurethane resin products, and of other of its products.
Cement
The Chlor-alkali Group’s one-kiln cement operations lessen the group’s fixed costs through low maintenance and labor and outsourcing expenses. Their improved waste plastic processing capacity and capability also contribute to operational profitability.
Medium term, the group is considering increasing the waste plastic processing of its cement operations. This will involve an upgrade to its cement manufacturing facilities alongside ongoing programs to conserve energy and reduce energy costs.
In fiscal 2017, the Chlor-alkali Group expects that demand for cement will remain steady. Demand related to the 2020 Summer Olympics and Paralympics in Tokyo should pick up in the second half of the year and offset a tapering off in domestic public-sector demand. Overseas, competition in Asia could intensify owing to slower growth in China. Tosoh, though, anticipates operating at full kiln production and sales capacity in fiscal 2017.