Annual Report 2017




In fiscal 2017, the Petrochemical Group counterbalanced price-reducing forces with strong exports and cheaper manufacturing costs.

  • Snapshot

    The Petrochemical Group supplies diverse customers with conventional and high-performance and specialty products. Polymers, including polyethylenes and functional polymers, and olefins are the group’s main product lines, and the group maintains its competitive edge by moving its products upstream, managing its product mix, cutting its costs, and diversifying its product lines. The Petrochemical Group bridges the gap between the Specialty and Chlor-alkali Groups in Tosoh’s dual commodities and specialties strategy.

    Tosoh has utilized olefin feedstock from the Petrochemical Group to become an integrated manufacturer of hydrocarbon-based products and their derivatives, including ethylene, propylene, cumene, and aromatic compounds. Customers use olefins to manufacture a broad range of products, from automotive additives to food flavors and fragrances.

    The Petrochemical Group’s polymer operations manufacture ethylene vinyl acetate (EVA); low-density polyethylene (LDPE); linear low-density polyethylene (LLDPE); high-density polyethylene (HDPE); and such functional polymers as chloroprene rubber (CR), adhesive polymers, and engineering plastic resins. The polymer operations adapt product specifications to meet customer needs for polymers in consumer and industrial products. Various grades of EVA are found in everything from solar cells to shoe soles. LDPE is used in medical applications and food packaging. And HDPE is applied in injection moldings and high-purity pharmaceutical containers.

    Chlorosulfonated polyethylene (CSM) rubber and polyphenylene sulfide (PPS) feature in the Petrochemical Group’s functional polymer lineup. CSM is a highly durable rubber, and Tosoh is the leading global CSM producer. PPS is also in great demand globally as an engineering plastic, as it helps automakers develop lighter, more fuel-efficient vehicles.

  • Group Performance

    Significantly Improved Profitability

    The Petrochemical Group’s net sales decreased 7.8% from a year earlier, to ¥161.7 billion (US$1.5 billion). The group’s contribution to Tosoh’s consolidated net sales likewise declined, from 23.3% to 21.8%. In contrast, operating income rose ¥8.5 billion, or 72.9%, to ¥20.1 billion (US$185.3 million), owing to increased exports and accounted for 18.1% of Tosoh’s consolidated operating income. The group’s operating margin was 12.4%, up from 6.6% a year earlier.

    Petrochemical Group product shipments of ethylene, propylene, and other olefins were steady. But prices fell because of decreases in the cost of naphtha and other raw materials and fuel.

    Prices of polyethylene resin products in Japan also fell, reflecting lower naphtha prices. Exports of CR and CSM, however, increased on strong demand overseas. Prices dropped, though, because of the strong yen.

  • Developments

    During the period under review, Tosoh allocated ¥1.9 billion to Petrochemical Group R&D. The group, in turn, continued and continues to develop and commercialize PPS to meet the demand for increasingly lightweight and complex automotive components. It also continues its R&D on grades of CR for transmission belts.

    Petrochemical Group R&D is dedicated to developing and improving polymers and related technologies. R&D into unique, high-value-added polyethylene products of superior functionality is ongoing. The group is also developing new and improving grades of laminate products, food packaging materials, and other related products. It is making progress toward clean, heat-resistant grades of polyethylene products intended for medical applications.

    Using Tosoh’s new, proprietary catalyst, the Petrochemical Group has developed a world-class, ultrahigh molecular weight polyethylene (UHMWPE). Applications being developed for this product are wide ranging and include separators for lithium secondary batteries, sliding parts, and more.

    Tosoh is the world’s top manufacturer of CSM. Through the Petrochemical Group, it is establishing a reputation among customers and is expanding the market for this high-quality product. The group is also developing applications for PVC paste in wallpaper, flooring materials, and other applications by listening to the market and responding to customers’ needs. In addition, the Petrochemical Group is devising polymer materials based on unique concepts for their use as LCD materials, flexible display substrate materials, and other applications.

  • Positioning


    Tosoh continues to operate its Yokkaichi Complex-based naphtha cracker at full rate to achieve a balance between the consumption and sale of each fraction of naphtha. To this end, the Petrochemical Group will increase the efficiency of that naphtha cracker by installing a gas turbine by spring 2020.

    In Asia, the Petrochemical Group sees olefins as a growth market over the long term despite rising competition from Middle Eastern and Asian suppliers. Developing economies invariably consume increasingly large amounts of olefins, as is happening throughout the Asia-Pacific region. And the Petrochemical Group maintains some advantages over competitors in many markets.


    The Petrochemical Group’s strategy for its core polyethylene products is differentiation. It will focus on high-value-added grades, new products, and customization for market segments and major customers. This also involves promoting the commercialization of ultrahigh-molecular weight polyethylene.

    Functional Polymers

    The Petrochemical Group is repositioning itself in the technically advanced CR market by expanding its line of superior-grade products. This includes introducing injection-mold and sulfur-modified CR grades.

    Demand for PPS resins from the principal customer for these products, the global automobile industry, is estimated to grow over the medium term. The Petrochemical Group is poised to meet that demand and continues to develop PPS grades for new applications in automotive parts to help automakers reduce vehicle weight. Susteel-brand PPS, for example, features superior metal bonding for automotive applications. The group has in addition developed SGX-grade PPS resin, which a leading smartphone maker and several Chinese smartphone makers are using in mobile phone casings.

  • Medium-term Business Plan

    Tosoh’s medium-term business plan has as an objective ¥17 billion in operating income for the Petrochemical Group by fiscal 2019. This represents a 15.5% decline from the ¥20.1 billion in operating income achieved in fiscal 2017. The plan also aims for a fiscal 2019 group operating margin of 10.4%, a drop of 2 percentage points from fiscal 2017. The Petrochemical Group is well positioned to reach its targets for fiscal 2019, having exceeded them in the first year of the plan.

    The plan’s focus in olefins is on ethylene, propylene, and cumene. A priority will be to optimize earnings by maintaining high-capacity utilization rates for the Petrochemical Group’s naphtha crackers. The group will enhance its energy-intensity competitiveness and build a pricing structure that incorporates an appropriate spread.

    The Petrochemical Group relies on its refinery and petrochemical modeling system (RPMS) to deal with a changing business environment. It adjusts the mix of its cracker output, for instance, to maximize profitability. As a result, it is prepared to expand by taking advantage of opportunities that arise from managing the balance among production rates, product mix, and market prices.

    Polymers, too, figure in the medium-term business plan. The emphasis is on polyethylene and the functional polymers CR and CSM. The focus in functional polymers is to expand sales of special grades of CR, particularly of sulfur-modified and injection-mold CR.

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