Chemicals
The TonenGeneral Group is growing our unique and competitive Specialty Chemicals business while enhancing the competitiveness of the Basic Chemicals business through strong synergies with our oil refining operations.
Basic Strategy
Our Chemical segment is comprised of Basic Chemicals and Specialty Chemicals. The Basic Chemicals business is affected by a cyclical market, in which margins are driven by supply/demand imbalances over multi-year cycles. In order to mitigate the impacts from the down-cycle of the basic chemicals market, and to steadily increase profits in our Chemical segment, it is essential to maintain our competitive edge through differentiation of our products as well as enhancing the cost competitiveness of our Basic Chemicals business. The key to achieving this is a long-term approach to the growth of our Specialty Chemicals business, which is less impacted by cyclic market conditions.The TonenGeneral Group is working to generate stable profits under the following basic policies:
- Focusing on operating efficiency
- Assembling a unique business portfolio
- Conducting our operations, including in our oil segment, in an integrated manner
- Maintaining rigorous standards and investing in high-profitability projects
- Demonstrating leadership in technology
In particular, efficient integrated operations with our oil segment have achieved high synergy effects.
Our Basic Petrochemicals
Naphtha produced at oil refineries is the main feedstock for petrochemical production. It is a chemical with properties similar to raw gasoline. Naphtha is cracked (transformed in a process under steam and high temperature that breaks it down into smaller molecules) to produce basic chemical building blocks such as ethylene and propylene. These ethylene-type basic chemicals are commonly called “olefins”; our olefins are mainly produced at Kawasaki plant of Tonen Chemical Corp.
In a separate process, naphtha is passed through a reformer that converts the material's molecular structure to produce a material called “reformate,” which is usable both for motor gasoline and further processing. The stream of reformate used for chemicals is treated in a BTX unit to extract and separate chemicals such as benzene, toluene and xylene, a group of chemicals commonly called “aromatics.” After this extraction, the residual material from the BTX unit is returned to the refining pool to produce gasoline. Aromatics are mainly produced at Sakai and Wakayama refineries.
Responding to the cyclical nature of the market, in our basic chemicals business,we continued to focus on fixed cost reduction, energy efficiency improvement, and operational reliability. We also pursued overall optimization through the integration of our refining and chemical businesses and profitability improvement through feedstock diversification by making the required investments in facility modification. In 2010, we more than doubled our butane cracking capacity and enhanced flexibility and economy through the utilization of oil products other than naphtha, which is normally used as a feedstock for basic chemicals.
Our Specialty Chemicals
We continue to focus on the enhancement of specialty chemicals products, earnings for which are affected by market changes in a way which is different from basic chemicals products. Sales volumes of specialty solvents in 2010 increased versus the previous year, supported by continuous strong demand in the electronics materials sector, especially in the liquid crystal materials sector. Sales volumes of adhesives for disposable diapers and tires also increased versus the previous year due to expanding demand in China.
