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Business Trends

China's push to go green drives up prices of high-end plastics

Emissions controls make feedstocks costlier for Japanese producers

Prices are poised to rise for high-performance plastics used in vacuums and other appliances.

TOKYO -- Material manufacturers are raising prices on high-performance plastics as tighter environmental regulations on Chinese production squeeze supplies of raw materials.

Toray Industries has entered talks with customers to lift the price of polybutylene terephthalate by at least 25 yen (22 cents) per kilogram, or about 5% to 6%, starting this month. Mitsubishi Engineering-Plastics is weighing a similar increase. The material, which boasts high durability and heat resistance, is often used in parts around electronic components in autos and home appliances.

The attempts at hikes owe mainly to higher prices for purified terephthalic acid, or PTA, a key feedstock derived from naphtha. While naphtha prices have fallen with crude oil's recent drop, PTA stood at around $960 per ton in late October, up 15% from May. Tougher emissions restrictions on production facilities in China, which accounts for 80% of global production, have reduced supply.

Both Toray and Mitsubishi Engineering-Plastics announced price increases of about 10% on polybutylene terephthalate last spring, citing rising feedstock and transport costs, but these met with resistance from customers. If customers accept hikes this time around, the polymer's market price would climb to 450 yen or more per kilogram.

Stricter Chinese regulations and trouble at production facilities are also spurring price increases on ABS (acrylonitrile butadiene styrene) resin which sees use in a wide range of applications, including appliances and other household goods. Techno-UMG, Japan's largest producer of the resin, in July began negotiating toward a hike of at least 10%, with Toray pushing for a similar rise.

But convincing customers to accept price increases on high-end plastics is likely to prove an uphill battle. Though producers face little competition from imports, unlike with commodity-grade plastics, there is by no means a shortage. Japanese production of polybutylene terephthalate grew 8% on the year to 87,330 tons for the eight months through August, while ABS resin output edged down 4%, according to the Japan Plastics Industry Federation.

Production trends for both plastics are linked to Japanese output of autos and home appliances, for which domestic demand is flat or falling slightly. This stands in contrast to commodity-grade plastics, which benefit from growing demand in such applications as food packaging.

"We can't pass on the cost increase to automakers," said an auto parts supplier that buys high-performance plastics.

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