TOKYO -- AGC joins a list of Japanese materials groups investing heavily in Southeast Asian production, emboldened by Chinese rivals' struggle to meet Beijing's stricter environmental regulations.
The company formerly known as Asahi Glass plans to invest about 100 billion yen ($889 million) to increase regional output of caustic soda -- an important industrial chemical -- and polyvinyl chloride, or PVC, used to make pipes and building materials increasingly in demand for infrastructure.
The spending will begin in Thailand, where a plant operated by subsidiary Vinythai in the southern province of Rayong will undergo an expansion slated for completion in 2021 to 2022. Production capacity for caustic soda, also known as lye or sodium hydroxide, is to rise 60% to 590,000 tons, while PVC capacity will nearly triple to 860,000 tons.
Caustic soda is used in the production of aluminum and paper and to treat wastewater. PVC is made by combining chlorine -- a byproduct of caustic soda production -- and ethylene, which is derived from natural gas.
Tokyo-based AGC also plans to grow output of these products in Indonesia, home to its regional headquarters. Construction of the added capacity will begin in 2022 to 2023, and annual capacity is seen rising to 1 million tons of each product by 2025, up from the current levels of 700,000 tons of caustic soda and 550,000 tons of PVC.
These investments will lay the capacity to produce around 2 million tons each of the products in Southeast Asia a year, and help AGC maintain its leading 40%-plus share of the regional market for caustic soda.
As China strengthens environmental regulations, many Chinese chemical plants unable to clear the higher standards have halted or cut production. This encouraged AGC to make a large investment in Southeast Asian capacity because it sees a low risk that Chinese rivals will dump excess output on the market or undercut it on price.
Sharp cuts in output of Chinese-made chemicals are sending prices of various goods soaring and triggering supply shortages, both of which create opportunities for rivals
Another Japanese materials company, Shin-Etsu Chemical, will increase production of silicone in Thailand for use in plastic parts and cosmetics, as well as of compounds that make the polymer. Production will also rise in South Korea and elsewhere.
Also in short supply are the graphite electrodes used in electric furnaces for steel production. In June 2017, China purged illegal operators that make crude steel from scrap iron and started encouraging less-polluting electric furnace production. The result has been a scramble to procure high-quality graphite electrodes from Japanese makers Showa Denko and Tokai Carbon.
Methyl methacrylate, the monomer used for the production of acrylics, is another chemical in strong demand, because of the stoppage of plants that make the acrylonitrile used as a starting ingredient, and because China has curbed imports of waste plastic, creating a steep drop-off in the production of MMA from recycled waste acrylics.
One beneficiary is Mitsubishi Chemical, which has fired up a new 100 billion yen MMA plant in Saudi Arabia and seen prices for the monomer skyrocket amid a global supply crunch.