Mitsubishi Chemical Plans To Split Petrochemical Business By 2028

Mitsubishi Chemical Group (MCG), headquartered in Tokyo, announced on May 25 that its consolidated subsidiary Mitsubishi Chemical Corporation has begun considering spinning off its basic chemicals business, centered on petrochemicals, and establishing it as a wholly owned group subsidiary.

The company stated that this potential adjustment is part of the group’s overall strategy, aimed at preparing for future mergers and integrations as well as industry-wide restructuring. The relevant details are currently under discussion, and the plan is to complete the business spin-off by the end of the fiscal year ending March 31, 2028.

The scope of this study primarily focuses on the basic chemicals business under Mitsubishi Chemical Group’s Basic Materials segment. The business scope may be adjusted accordingly as the project progresses.

Mitsubishi Chemical Group stated that the demand structure in both the Japanese and overseas markets has changed, and coupled with the continued decline in the company's competitiveness (especially in East Asia), the operating environment for the petrochemical industry has become increasingly severe.

The group stated that to support the development of domestic industries in Japan, it will continue to ensure the stable supply of basic chemicals, enhance product added value, and strengthen the supply chain system, thereby helping to boost the competitiveness of domestic industries. In light of recent changes in the Middle East situation, the importance of the chemical industry in maintaining the security of domestic supply chains has also become increasingly prominent.

Industry Restructuring and Merger & Acquisition Trends

Mitsubishi Chemical Group believes that industry-wide restructuring and mergers and acquisitions have become an inevitable trend, which is also the core reason behind the Group’s decision to explore spinning off the relevant business into a wholly owned subsidiary. This strategic move is intended to respond to the future wave of industry consolidation, enhance the company’s competitiveness, and further strengthen the domestic supply chain.

According to the latest financial report, Mitsubishi Chemical Group’s Basic Materials and Polymers segment recorded an operating loss of 4.1 billion yen (US$25.7 million), a sharp narrowing from a loss of 12.0 billion yen in the previous fiscal year. Segment revenue fell 19.8% year on year to 790.6 billion yen.

In early May this year, Mitsubishi Chemical, together with Asahi Kasei and Mitsui Chemicals, announced plans to establish a joint operating entity to centrally manage two ethylene production facilities in western Japan. Under the operational restructuring plan, the Asahi Kasei Mitsubishi Chemical ethylene steam cracker in the Mizushima area will be shut down, and its capacity will be consolidated into the Osaka Petrochemical cracker in Takaishi City. The overall transformation is scheduled to be completed within the fiscal year ending March 2031.

The cooperation plan was first announced in January this year, aiming to optimize the operational efficiency of the petrochemical business and enhance industry competitiveness. The equity ratio of the new operating entity is determined according to the olefin procurement scale of each company: Mitsui Chemicals and Mitsubishi Chemical each hold 45% of the shares, while Asahi Kasei holds 10%.

In terms of capacity, the two ethylene units had a combined annual production capacity of 951,000 tons before the integration; after the Mizushima cracker is shut down, the overall annual capacity will be reduced to 455,000 tons. Affected by overcapacity, Maruzen Petrochemical, ENEOS, and Idemitsu Kosan had previously announced the shutdown of three domestic cracking units in Japan. With the Mizushima unit now confirmed for closure, the total ethylene capacity Japan plans to withdraw will increase from about 1.3 million tons per year to about 1.8 million tons per year.