Japan Chemical Imports from China Surge Amid Middle East Crisis

Japan's imports of key chemical products from China surged in March, highlighting a rapid shift in sourcing patterns as supply disruptions linked to the Middle East crisis strain domestic production and raise concerns over long-term industrial competitiveness.

An analysis based on Japan's Ministry of Finance final trade statistics released on April 28, alongside detailed March trade data from China's General Administration of Customs, shows that Japan's imports of major plastic raw materials from China rose 27% year-on-year.

The increase reflects both emergency procurement measures and a broader structural adjustment, as Japanese companies seek to offset shortages of naphtha — a critical feedstock for petrochemicals — amid tightening supplies caused by disruptions around the Strait of Hormuz.

Sharp Rise in Plastic Feedstock Imports

Imports of high-density polyethylene (HDPE), widely used in food packaging, detergent bottles and plastic bags, jumped 2.7 times from a year earlier in March and stood about 20% above the 2025 monthly average. Polystyrene, used in food trays and home appliance components, rose 76% year-on-year.

The data indicates a broad-based increase in Japan's reliance on Chinese plastic inputs, as domestic output weakens due to constrained feedstock availability.

Dormant Trade Flows Resume

Some chemical imports that had effectively ceased in recent years have also resumed.

Japan imported 1.97 million kilograms of butadiene from China in March — the first such shipment since 2021. Butadiene, a key feedstock for synthetic rubber used in tires, is considered difficult to substitute.

Xylene, a core component in industrial solvents facing shortages in Japan, also reappeared in bilateral trade flows. Chinese customs data recorded exports of mixed xylene to Japan for the first time in six and a half years.

However, sourcing dynamics remain uneven. Industry sources indicate that smaller Japanese firms have struggled to procure xylene due to its classification as a dual-use substance, complicating export approvals in China. Larger chemical producers with established government-linked trading channels appear to be securing supplies more smoothly.

Solvents, which are essential in coatings for construction and automotive applications, rely on complex blends of multiple chemicals. Shortages of even a single component can disrupt production, prompting companies including Nippon Paint Holdings to adjust supply allocations.

Feedstock Crunch Hits Domestic Output

Japan's petrochemical sector relies heavily on naphtha, more than 80% of which is sourced from the Middle East. With the Strait of Hormuz effectively constrained, procurement has become increasingly difficult.

Ethylene, propylene and butadiene — the building blocks of petrochemical products — are produced via naphtha cracking. Reduced feedstock availability has forced many domestic ethylene plants to cut operating rates to minimum levels, maintaining only essential supply chain functions.

These base chemicals underpin a wide range of downstream products, from polyethylene and PVC resins to materials used in food packaging, automobiles and electronics.

China Maintains Supply Flexibility

In contrast, China's chemical supply system remains relatively resilient. Analysts point to diversified crude oil import sources and alternative production pathways as key advantages.

While Japan's production is largely naphtha-based, China has expanded capacity using ethane derived from natural gas and coal-based chemical processes. The country continues to leverage abundant domestic coal resources to sustain output.

Major producers are maintaining high utilization rates. China Shenhua Energy reported a 10% year-on-year increase in polyethylene sales in March. Meanwhile, Sinopec said its coal chemical units are operating at full capacity, with large-scale maintenance plans postponed.

Supply availability appears robust even at the retail level. On platforms such as JD.com, industrial solvents remain widely available with next-day delivery options, and no significant price increases reported by vendors.

Although China has imposed export controls on certain fuel and petroleum products deemed strategically important, companies are actively expanding exports of unrestricted chemicals to capitalize on overseas demand.

Strategic Shift or Temporary Response?

Japanese trading houses report a clear uptick in imports from China as firms seek to mitigate risks tied to Middle Eastern supply disruptions.

While current procurement is widely viewed as a short-term contingency measure, industry executives warn that prolonged reliance on competitively priced Chinese imports could reshape the market.

A senior executive at a major Japanese chemical company noted that Chinese firms are increasingly entering supply chains through intermediate materials, aiming to establish a long-term foothold.

Japan's chemical producers are already restructuring in response to shrinking domestic demand, consolidating and closing production facilities. A sustained influx of imports could accelerate this trend.

Echoes of the Steel Sector

Industry observers draw parallels with the steel sector, where excess Chinese capacity led to a surge in low-cost exports that reshaped global markets.

Japanese steelmakers have been forced into significant restructuring. Nippon Steel plans to reduce its domestic blast furnaces from 15 to 10, while JFE Holdings has already shut a furnace in Kawasaki and plans further closures in Hiroshima by fiscal 2027.

If current trends persist, analysts warn that Japan's chemical industry could face a similar trajectory — raising the specter of a prolonged “petrochemical winter” driven by sustained inflows of lower-cost Chinese products.