A slowdown in petrochemical production in Japan is likely to cut the sector's demand for thermal coal imports. Naphtha-fed crackers in the country have mostly avoided any halt in production caused by supply disruptions, but a few firms have reduced output.
Some of the firms that have reduced production include Mitsui Chemicals and Idemitsu. Japan relies on the Middle East for naphtha imports, but supply has been disrupted by the US/Israel-Iran war. But the country is ready to meet domestic requirements for petrochemical products derived from naphtha for at least six months, Japan's ministry for economy, trade and industry (Meti) said.
Firms running naphtha-fed crackers are expected to reduce their procurement of thermal coal because of the slowdown and the tight supply of feedstocks, a Japanese trader that supplies thermal coal to chemical firms in the country said. Petrochemical firms usually import bituminous NAR 6,000 kcal/kg coal from Australia for their captive power plants.
Thermal coal imports by Japan's petrochemicals sector are estimated to be around 4.5mn t/yr, according to market sources. This is a small percentage, around 3pc, of the country's overall coal imports of 140mn-160mn t/yr, according to customs data from Japan's ministry of finance.
A potential cut in coal imports by the sector due to run cuts could be expanded by the shift away from coal by petrochemical companies to using alternative fuels for operations to reduce CO2 emissions.
Japanese petrochemical firm Tosoh will start its captive 74MW biomass-fired power plant by end of April the company told Argus on 10 April. The plant is expected to co-fire 50pc of biomass with coal before transitioning to 100pc biomass in 2030. The captive power plant is designed to utilise a combined 360,000-410,000 t/yr of imported wood pellets, construction waste, paper and plastic waste, and coal, according to Tosoh.
Tosoh also reduced its coal consumption by shutting down its aging 62MW thermal coal captive power plant, which began operations in 1963. The petrochemical company halted its cracker in central Japan on 4 March for regular maintenance, which was scheduled before the US-Iran war. The cracker was originally planned to restart around 20 April. Tosoh has ensured that it will resume its cracker's operations around the end of April, said the company on 8 April.
Power sector demand in Japan
But Japanese demand for thermal coal from the power sector is likely to increase in the near term on the back of Meti's temporary removal of restrictions on the operations of inefficient coal-fired power plants in the 2026-27 fiscal year. The removal of restrictions has already led to some enquiries from Japanese utilities.
Thermal coal demand from Japan over the past week was focused on increasing annual term supplies. A Japanese utility sought about 2.8mn t of imported thermal coal for a year through a term contract, which likely remains under negotiation. It is seeking another 500,000t of coal in addition to the annual supplies under discussion.
Another Japanese utility sought up to two June-July-loading Panamax cargoes of high-CV coal for one of its older, less efficient power plants, a market source said. The utility may have awarded Indonesian high-CV coal for this tender, but details and prices could not be confirmed.
