Annual Report 2018

“The diversity of Tosoh’s petrochemical product offering is one of the keys to our success, and one of our primary competitive advantages.”




Persistent efforts to procure naphtha and benzene at the best possible price and to optimize the balance between internal production and the external procurement of materials contributed to growth in profits.

  • Snapshot

    The Petrochemical Group plays a critical role in Tosoh’s dual operational strategy by producing stable-demand, revenue-generating commodity products and more-profitable high-performance specialty products. The group’s primary product lines are polymers, including polyethylene and functional polymer products, and olefins. By managing the procurement of raw materials such as naphtha; by balancing the internal production and external sourcing of ethylene; and by constantly developing differentiated, high-value-added grades of products, the Petrochemical Group supports Tosoh’s efforts to achieve balance between its commodity and specialty goods.

    Tosoh’s ability to manufacture hydrocarbon-based products, such as ethylene, propylene, cumene, and aromatic compounds, in an integrated, efficient fashion is due largely to olefin feedstock supplied by the Petrochemical Group. The company also sells the Petrochemical Group’s olefins to external customers, who use them to manufacture products for automotive, construction, and diverse other applications.

    Products from the group’s polymer operations include ethylene vinyl acetate (EVA), which can be found in solar cells and shoe soles; low-density polyethylene (LDPE), applications for which include medicine and food packaging; linear low-density polyethylene (LLDPE) for thin-film materials; and high-density polyethylene (HDPE), which is used in injection moldings and high-purity pharmaceutical containers.

    Polymer operations also produce functional polymers such as chloroprene rubber (CR), chlorosulfonated polyethylene (CSM) rubber, and polyphenylene sulfide (PPS) resin. CSM—for which Tosoh is the world’s leading supplier—and CR are most commonly used in automotive applications. And PPS resin, a unique, high-performance plastic, is becoming increasingly popular in automotive engineering, as it enables the development of vehicles that are lighter and that therefore offer improved fuel efficiency.

    In fiscal 2019, the Petrochemical Group expects negligible effects on the Asian market from an influx of shale-based, foreign-made ethylene derivatives. The group’s diverse lineup of derivatives provides it with valuable flexibility, and its established framework enables it to maintain an ethylene supply balance. A decline in demand for propylene from industrial complex customers is forecast for the medium term, but demand is expected to remain steady throughout fiscal 2019.

  • Group Performance

    Improved Profitability

    The Petrochemical Group’s net sales rose 8.1% from a year earlier, to ¥174.8 billion (US$1.6 billion). However, the group’s contribution to Tosoh’s consolidated net sales edged downward, from 21.8% to 21.2%. Operating income, meanwhile, increased ¥2.4 billion, or 12.2%, to ¥22.5 billion (US$212.0 million), owing to increased exports and accounted for 17.2% of Tosoh’s consolidated operating income, down from 18.0% in fiscal 2017. The group’s operating margin was 12.9%, up from 12.4% a year earlier.

    Olefin products, such as ethylene and cumene, experienced decreased shipments but increased prices because of higher costs for naphtha and other raw materials. The increased cost of naphtha and other raw materials also drove polyethylene resin prices up, yet their domestic shipments likewise rose. On the strength of robust demand overseas, shipments and export prices of CR increased.

    The Petrochemical Group’s persistent efforts to procure naphtha and benzene at the best prices and to optimize the balance between internal production and the external procurement of materials contributed to its growth in profits.


  • Developments

    Evolving Markets

    In fiscal 2018, external naphtha cracker operators accounting for about 20% of Japan’s naphtha production capacity closed their facilities, lowering the country’s comprehensive production capacity of around 7.5 million metric tons to about 6 million metric tons. The decrease in naphtha output led to a decrease in the production capacity for derivatives, down to around 3 million metric tons.

    The steam cracking of naphtha produces ethylene, but ethylene can also be manufactured in ethane crackers using shale gas. This method is raising ethylene production capacity globally. Its disadvantages are that ethane is challenging to ship, as it must be kept at a temperature close to -100°C, and that ethane crackers produce only ethylene.

  • Positioning


    Tosoh continues to balance its naphtha fraction consumption and sales and to maximize the cost-competitiveness of its cracking operations. It is installing a large new naphtha cracking furnace and gas turbine, and renovating the existing furnace, work on which is scheduled for completion in summer 2020. The company is securing steady external supplies of additional necessary components and diversifying sources of purchases, and these efforts are expected to lead to the strengthening of its commodity operations.


    The Petrochemical Group remains committed to polyethylene products distinguished by functionality, quality, and service amid expansion in the market for general-purpose polyethylene products driven by foreign manufacturers. The group will also promote its world-class ultrahigh molecular weight polyethylene.

    Functional Polymers

    Over the past several years, electric vehicles have grown in popularity. This has propelled demand from the automotive industry for PPS resins to satisfy requirements for lighter construction and increased fuel and power efficiency. That demand is expected to continue for the foreseeable future. And the Petrochemical Group is redoubling its R&D efforts to develop high-performance grades of PPS to meet demand. It is developing a PPS compound that offers resistance to thermal shock far superior to that of standard products.

    By employing fusion technology, the Petrochemical Group hopes to develop differentiated PPS compounds to expand its PPS sales. It will also invest capital in its plants to prepare for an expected increase in demand for metal terminal connectors for automotive applications.

    The Petrochemical Group is also focused on developing a high-performance product to satisfy the needs of car manufacturers for applying automobile underbody coating at a lower temperature than before. The Petrochemical Group has already started providing samples of the new product and is working closely with customers toward full-scale adoption.

    Amid tightening supply in the global CR market, the Petrochemical Group maintains its full-scale manufacturing of such products as sulfur-modified CR and water-based latex, sales of which are steady. It is also developing products and cultivating applications to satisfy customers’ specific needs while undertaking debottlenecking and maximizing production efficiency.

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