Petrochemicals and Carbon Products
From KAITEKI Report 2023 issued in September 2023
- Stronger business foundations and the carve-out process
- Transforming the carbon products business model
- Achieving carbon neutrality through stronger ties with the oil refining industry and neighboring regions
Stronger business foundations and the carve-out process
Within the MCG Group, the petrochemicals and carbon products businesses are currently the biggest emitters of CO2. In these businesses, we would need to make a large environmental-focused investment in the future if we are to achieve carbon neutrality. Moreover, domestic demand for petrochemicals and carbon products is declining and Chinese companies are emerging, resulting in ongoing oversupply. Against this backdrop, we are transforming our business model in both petrochemicals and carbon products in order to achieve a circular economy and become more competitive. At the same time, we are moving ahead with processes to carve out the petrochemicals and carbon products businesses from fiscal 2023.
Increased business value from a petrochemicals joint venture
- Quick and focused decision-making
- Synergies to improve the cost structure and margin expansion
- Business portfolio and asset evaluation and optimization
- Growth based on new technology both for green transformation and a circular economy
- Increased value and healthy position to monetize exit
- Note:Assuming JV core operating income of approx. ¥40.0 billion and net income of approx. ¥20.0 billion, 50% ownership
Transforming the carbon products business model
To meet the changing structures of the domestic steel industry, we have restructured to optimize existing sales portfolio and production systems at the MCG Group’s Kagawa Plant, which supplies coke for use in blast furnaces. The coke supplied under the SAKAIDE COKE brand is known for its highly uniform and stable quality and enjoys a correspondingly strong reputation with steel manufacturers worldwide. We aim to continue providing stable supplies of high-quality coke in the future.
Changing to an export-oriented business model
Restructuring in the domestic steel industry
- Cease operations at five of 25 blast furnaces in Japan by 2023 (crude steel production to be reduced by 9 million tons per year, resulting in a drop of 4 million tons per year in demand for coke)
Restructuring of the MCG Group’s coke business
- Reduce the number of coke ovens at the Kagawa Plant from 323 to 250 and optimize operations
- Double export shipping lines to two
SWOT analysis
Strengths
- PetrochemicalsAccumulation of advanced technologies across a broad product chain from basic petrochemicals to derivatives
- Carbon productsExceptional coking coal blending technologies and coke quality management technologies
Weaknesses
- PetrochemicalsFluctuating earnings due to raw material prices and global market conditions
- Carbon productsFluctuating earnings due to raw material prices and global market conditions
Opportunities
- PetrochemicalsTechnology license agreements and proprietary catalysts in growing global markets
- Carbon productsGrowing demand for coke due to crude steel production expansion in developing countries such as India
Threats
- PetrochemicalsImports into the domestic market of petrochemicals derived from U.S. shale Major capacity expansion in China and South Korea
- Carbon productsAdoption of low-carbon technology by the steel industry
Achieving carbon neutrality through stronger ties with the oil refining industry and neighboring regions
As we work to achieve carbon neutrality by 2050, the MCG Group is implementing energy conversions at domestic plants and is considering the commercialization of basic chemicals such as ethylene and propylene produced from bio-based raw materials. Working with ENEOS Corporation, we are constructing a chemical recycling facility at our Ibaraki Plant that will convert waste plastic to oil, with an annual processing capacity of 20,000 tons, the largest of its type in Japan. We aim to commence operations during fiscal 2023.
The Kashima coastal industrial zone, located in Ibaraki Prefecture, is one of Japan’s leading industrial clusters centered on the basic material industries of petroleum refining, petrochemicals, and steel. The MCG Group will collaborate and cooperate more closely with Ibaraki Prefecture with the goal of creating an industrial base that is both highly competitive and carbon neutral, centered on the Kashima coastal industrial zone.
