Mitsubishi Chemical cuts ethylene output

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Mitsubishi Chemical makes ethylene at plants in Chiba and Osaka prefectures. japantimes.co.jp

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Mitsubishi Chemical has cut ethylene output at its Kamisu plant in Ibaraki since Friday, citing the risk of running short of naphtha feedstock as the Middle East conflict disrupts shipping and financing, according to The Japan Times. Ethylene is the base input for plastics and a long list of downstream products, from resin auto parts and synthetic fibres to food packaging. The company has warned major customers, and peers are preparing similar moves.

Japan’s petrochemical industry runs 12 naphtha-based ethylene facilities, and the country imported roughly 60% of its naphtha in 2024, with about 70% of those imports coming from the Middle East, according to the Japan Petrochemical Industry Association cited by the Times. That dependency becomes acute when the Strait of Hormuz is treated as “effectively closed” for insurance and trade finance even if the waterway is not physically blocked. A cracker can keep running only as long as feedstock and spare parts arrive on schedule; once suppliers and banks begin inserting war-risk clauses, the cheapest option is often to slow down before the plant is forced into an unplanned shutdown.

The immediate cost is not just fewer tonnes of ethylene. Running a cracker below optimal utilisation raises unit costs, and downstream buyers face either higher prices or rationed supply. The longer-term cost is the behaviour change: companies that previously minimised inventory and relied on predictable tanker flows start paying for buffer stocks, alternative suppliers, and redundant logistics. Mitsui Chemicals is considering buying more naphtha from outside the Middle East, while Idemitsu Kosan has warned clients it could suspend operations at facilities in Chiba and Yamaguchi if the disruption drags on, the Times reports. Diversification helps, but it is rarely free: different grades, longer routes, and less favourable contracts tend to show up as a permanent uplift in the industrial cost base.

For policymakers, this is an awkward kind of inflation. It does not begin with wages or consumer demand; it begins with risk premia embedded in shipping, insurance, and working capital. A plastics producer can hedge oil, but it cannot hedge a bank refusing to confirm a letter of credit, or an insurer withdrawing cover. When that happens, “resilience” is purchased the hard way—through lower capacity, higher inventories, and more expensive substitution.

Mitsubishi Chemical’s Kamisu plant is producing less ethylene not because Japan stopped buying plastics, but because a supply chain that used to be priced as routine is now being priced as war.