Denka mulling ‘comprehensive measures’ for chloroprene rubber business

Tokyo – Denka Corp. is considering the need for “comprehensive measures” at its chloroprene rubber (CR) business in response to a decline in demand and environmental challenges seen in 2023.

The Japanese group aims to make a decision by mid-year, ‘carefully examining’ whether demand can recover to pre-Covid levels of around 270-290 kilotonnes per annum (ktpa).

As well as demand, Denka will assess factors such as exchange rates and raw materials market trends to determine an “optimal production capacity” for its CR business, Denka said 10 May.

The decision will determine the capacities required at the group's plant in Qinghai, China and Denka Performance Elastomer (DPE) facility in Louisiana, US.

Denka went on to note the potential impact of “very stringent” regulations announced by the US Environmental Protection Agency (EPA) on 9 April.

However, it said, the group will decide on fundamental measures for the CR business based on broader factors, particularly demand trends.

For its fiscal year 2023, ended 31 March, Denka’s elastomers business, which largely comprises the CR operations as well as 'cements', reported an operating loss of Yen93 billion, down from a prior-year profit of Yen11 billion.

The reversal reflected “global sluggish demand for CR” as well as increased costs at DPE which, Denka said, led to inventory-valuation losses linked to raised fixed costs.

According to the group's results statement, demand has remained sluggish for industrial and adhesive products since the third quarter of fiscal year 2022.

Denka noted a “recovery trend” in demand for automotive applications but said ongoing inventory adjustments in the market have continued, leading to a decline in volumes.

Volumes at the Japanese materials supplier were further impacted by disruption caused by the Noto Peninsula earthquake on 1 Jan.

Looking ahead, Denka said it expects selling prices to decline due to “intensified competition,” in the near-term. 

However, the group also anticipates a reduction in inventory valuation losses due to demand recovery, thereby narrowing its losses.