Vinyl Isocyanate Chain
Tosoh’s truly powerful competitive advantage is its integrated production capability. The company’s vinyl isocyanate chain combines the vinyl and isocyanate processes. This facilitates the efficient, high-volume production of raw materials to be used either as feedstocks fed back into the chain to make more raw materials or finished products internally by Tosoh and its group companies or to be sold to external customers for use in their finished products. No other manufacturer in Asia possesses such a comprehensive capability.
The vinyl side of the chain begins with the electrolysis of salt to generate chlorine, caustic soda, and hydrogen and with the steam cracking of naphtha to produce ethylene, carbon monoxide, and benzene. Some of the chlorine produced is then reacted with ethylene and hydrogen chloride to make ethylenedichloride (EDC), while the remainder of the chlorine is used in manufacturing other chlorine products. EDC can be used to produce ethyleneamines by combining it with caustic soda, or it can be converted to vinyl chloride monomer (VCM), which, in turn, can be converted into PVC resins.
On the isocyanate side of the chain, the benzene that the naphtha cracking process yields is combined with hydrogen and ammonia to create aniline. This aniline is then mixed with formalin and with the chlorine and carbon monoxide generated by the vinyl chain to produce MDI, a raw material crucial in the production of polyurethanes. Hydrogen chloride, a by-product of the MDI manufacturing process, is fed back into the vinyl chain to generate additional EDC.
Sustained, safe operation of the vinyl isocyanate chain is essential in supporting not only the manufacture of the Chlor-alkali Group’s urethane, chemical, and cement products but also of the Petrochemical Group’s and the Specialty Group’s products and, moreover, of Tosoh’s external customers' products. External customers for Tosoh’s commodity and specialty products rely on Tosoh for a stable supply of consistently superior-quality products regardless of economic, environmental, or other conditions. The dependency, meanwhile, of Tosoh Group PVC makers in Southeast Asia for a stable supply of raw materials from Tosoh’s vinyl isocyanate chain extends the effectiveness and efficiency of the chain, greatly enhancing its value.
Urethanes
The Chlor-alkali Group’s Urethane Division recorded a strong performance in fiscal 2018, primarily on the strength of increased prices for isocyanate. However, concerns persist regarding activities by competitors to increase production capacity, fluctuations in the prices of raw fuel and other materials, changes in exchange rates, and risks related to the Chinese market.
Urethane market conditions are expected to decline in the year ahead. But the Urethane Division will continue developing high-value-added MDI products and strengthening its functional urethane to contribute to stabilizing and maximizing profits. The division will also strive to operate at full capacity in manufacturing to maintain vinyl isocyanate chain operations and in sales to boost revenue.
Among the division’s aims is to strengthen its business foundation by consolidating relationships with its domestic customers and by expanding the number of its specialty MDI products. The Urethane Division is also debottlenecking in phases to raise its production capacity domestically and it is bolstering its presence in China through a polyurethane sales and manufacturing base established in Shanghai’s Jinshan District in March 2017. It will similarly fortify its global sales structure. As of November 2017, MDI sales operations have already begun at Tosoh India.
The Urethane Division aims for a 50% share of the domestic market by 2022 by, in part, expanding its retail sales of HDI and HDI derivatives. It will also apply new technologies to the development of specialty and high-quality products that distinguish it from competitors. The division’s ongoing debottlenecking at its Nanyo Complex plant will also help it respond to growing market demand.
Chlor-alkali
Demand for PVC worldwide grew 44.0 million metric tons in fiscal 2018. The growth was driven by Asia, which accounts for over 60% of global PVC demand. The forecast for fiscal 2019 calls for continued growth in demand for PVC, again led by Asia. The most significant growth is expected in India and in Southeast Asia. PVC demand increased 3%, buoyed by robust investment in real estate and agricultural infrastructure. Domestic demand is anticipated to continue in fiscal 2019, albeit at a slower pace. Few production capacity expansion projects are anticipated in Asia and elsewhere through 2020, so it is expected that increased demand for PVC will be absorbed by existing sources.
The global caustic soda market showed improvement in fiscal 2018 and is expected to continue to grow at 3% annually amid continued tight supply and demand. Production capacity expansion plans are limited, resulting in demand overtaking supply.
Over the past several years, the Chlor-alkali Group has strengthened its operational foundation, minimized its power consumption and raw material costs, and operated at full capacity. The success of its efforts was evident in the significant increases in its net sales and profits in fiscal 2018. Going forward, the Chlor-alkali Group will examine expanding its chlor-alkali manufacturing capacity, partly by renovating and enlarging facilities at the Nanyo and Yokkaichi Complexes. The Chlor-alkali Group’s objective is to ensure production capacity to meet forecasted increases in demand particularly in Asia.
Cement
The Chlor-alkali Group will ensure stable cement production by implementing planned investments to refurbish and replace aging facilities. It will also gradually increase its use of clay substitutes to permanently phase out natural clay. Among its planned capital investments are increases for substitute fuels to reduce its need for coal. As well, the group intends on increasing revenue from recycling waste collected from external sources.
Domestic demand for cement is expected to continue at its present level through fiscal 2019. It will be driven by construction for the 2020 Tokyo Olympic and Paralympic Games, for the Chuo Shinkansen (bullet train) line, for the extension of the Hokkaido and Hokuriku Shinkansen lines, and for the reconstruction work following the Kumamoto Earthquake. Cement sales volume, however, is not expected to grow much because of anticipated schedule delays due to labor shortages, increased personnel costs, and a shift from reinforced steel to steel to shorten the duration of construction projects.
In fiscal 2018, Tosoh achieved 1.24 million metric tons in cement production and sales volumes. This was a first since its transition to single-kiln operations in April 2011.
Following the completion of construction projects related to the 2020 Tokyo Olympic and Paralympic Games, it is thought that cement demand in Japan will continue because of an anticipated backlog of large projects. In particular, infrastructure projects involving the repair and renewal of aging roads and bridges nationally are forecast to drive demand.