Vinyl Isocyanate Chain
The profitability of the vinyl isocyanate chain has been an issue for the Tosoh Group over the past decade. Fortunately, the chain’s profitability improved in fiscal 2017 because of lower naphtha and other raw material prices and the yen’s appreciation.
The upgrade in power generating facilities is due to be completed in winter 2018. Tosoh is also stabilizing the procurement of raw materials. And it is expanding PVC production capacity at PRII and enlarging the Chlor-alkali Group’s hydrochloric acid shipment facility.
Exploiting the cost-effectiveness of Tosoh’s independent electricity generation capabilities is an 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 including the Sakata Plant of Tohoku Tosoh Chemical Co., Ltd. Increasing domestic environmental taxes on fossil fuels also require the group to continue efforts to distribute Tosoh’s electricity generation and keep its electric power costs and its product pricing competitive.
The global VCM market is highly competitive but growing. 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. In contrast, China remains a difficult market to access because of its increasing use of the inexpensive 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 Nippon Polyurethane Industry Co., Ltd.’s (NPU) MDI, TDI, HDI, and functional urethane operations. NPU was fully integrated into Tosoh’s Urethane Division in 2014. From a single location within Tosoh’s head office, the division’s administrative staff has been 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 contending with debottlenecking and thereby freeing up MDI production capacity which will lend to increasing 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, 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 the Association of Southeast Asian (ASEAN) markets, the division has set up an MDI stockpiling base in Singapore.
Strengthening sales of monomeric MDI is another divisional priority. It will accomplish this through the increased production capacity of specialty MDI for high-value-added applications. It is also looking to accelerate the shift from commodity products to specialty products and from single-item sales to system sales.
In addition, the Urethane Division is considering establishing an overseas polyurethane system house.
Cement
The Chlor-alkali Group is improving the waste plastic processing of its cement operations through an upgrade to cement manufacturing facilities, simultaneous with continued programs aimed at conserving energy and reducing energy costs. The Chlor-alkali Group's single-kiln cement operations feature low maintenance, labor, and outsourcing expenses and thus low fixed costs.
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 2018, the Chlor-alkali Group expects that demand for cement will remain steady. Demand related to the 2020 Summer Olympics and Paralympics in Tokyo, the Linear Chuo Shinkansen (bullet train) and Kumamoto earthquake recovery needs should pick up in the first half of that 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 2018.