Industry Insight: Chemicals Sector In Japan

Japan’s domestic chemical companies may be good – but they don’t have all the answers, and that’s where specialist British firms can make their high-quality products, technology and knowledge count.

Chemical companies here have been shifting from manufacturing commodity products to high value-added specialty chemicals, in particular for the booming pharmaceutical sector, which offers opportunities for British firms in the outsourced manufacturing of active ingredients and intermediaries, according to the London-based Chemical Industries Association (CIA).

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Japan’s outsourced manufacturing of pharmaceuticals alone is worth $2 billion a year, the CIA said, and further increases are expected in the years ahead.
“For our members, Japan is the most prominent market in Asia and has the best prospects,” said Neil Harvey, head of the CIA’s International Trade and Sector Networks.
“Being successful in Japan is about trust, building relationships and it can take four or five years before it leads to orders, so a company has to think very much in the long term,” he said.

“We recommend to companies that are looking at Japan to explore the US and European markets first and only then turn to Japan,” he said, adding that the market here has peculiarities not found elsewhere and is best not tackled by the unwary.
But, contrary to the assumption that cost acts as a barrier to chemicals firms looking to enter the market here, Harvey says the key issues to bear in mind are ensuring quality and providing new technologies.
“It’s about delivering and making sure that your chemical does better than the alternatives,” he said.

Foreign firms are increasing their share of the Japanese market and presently control as much as 40 percent of the total market. Britain was the largest exporter of pharmaceuticals to Japan until 2008, when it was overtaken by Switzerland due to a sharp increase in products designed to deal with an outbreak of swine flu.
Japan currently imports more than £2.5 billion of drugs from the UK every year, accounting for 15 percent of total imports.

Technology is the UK chemical sector’s other key export.

Pentagon Fine Chemicals Ltd., based in Widnes, has found buyers in Japan for its phosgenation technology due to the strict controls on the process here. Equally, the micronization of chemical ingredients that has been perfected by Micron Technologies Ltd., headquartered in Dartford, Kent, has also proven popular in Japan.
Both companies were amongst the seven UK firms that took part in the CPhI event in Tokyo in April, the fifth largest national contingent present at the annual industry showcase.

“None of the UK pavilion participants had a wasted journey,” said Harvey. “Each managed to consolidate or improve their business in Japan by varying degrees.
“For most companies, their objective in participating in the show was to maintain existing contacts and find new leads, although one company reported new business worth more than £300,000,” he added.

The UKTI team at the British Embassy in Tokyo extended assistance to the firms taking part and works closely with the CIA.

“Japan’s chemical industry is the No. 3 in the world and the UK is around No. 9 globally, so it is vitally important that British firms provide value-added products and ensure a high level of quality if they want to succeed here,” said Kaori Arai, senior trade adviser in the life sciences and chemicals sectors for UKTI in Tokyo.

“For UK firms, this can be a market for niche products and while we have been focused on the pharmaceuticals sector for a while, we also believe there are opportunities in agrochemicals and that is something we want to explore in the near future,” Arai added.
Few UK companies operate a fully-fledged office in Japan, although Croda International can trace its operations here back to 1966, making it one of the first foreign chemical companies to invest in its own manufacturing facilities here.

“The unique ‘super refining’ process that we have at our factory in Shiga was developed using Croda Japan’s own technology and produces unrivalled products, including highly purified natural oils,” said Tatsuyuki Ikeda, technical marketing manager for the company.

These oils include low-allergy lanolin, olive oil, meadowfoam oil, beeswax and high-quality emollient esters.

“At the laboratory, which is adjacent to the factory, we are constantly developing new products, processes and formulations,” Ikeda said. “And we are always seeking cooperative development with customers.”


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Article by Julian Ryall, May 2014