Mitsui Chemicals, Idemitsu Kosan, Sumitomo Chemical Integrate Polyolefin Operations to Strengthen Japan's Stable Supply

Mitsui Chemicals, Idemitsu Kosan, and Sumitomo Chemical announced on September 10 that they will integrate their domestic polyolefin businesses. Sumitomo Chemical will join the joint venture Prime Polymer established by Mitsui Chemicals and Idemitsu Kosan. The two parties will integrate Sumitomo Chemical’s domestic polypropylene (PP) and linear low-density polyethylene (LLDPE) businesses in April 2026. Against the backdrop of shrinking domestic demand due to population decline, they will leverage the equipment advantages in the Keiyo area of Chiba Prefecture to optimize the production system and enhance market competitiveness.

Source: Baidu Encyclopedia

Sumitomo Chemical is considering transferring its related business to Prime Polymer for integration and participating as a shareholder by making a capital injection. Based on Prime Polymer’s current shareholding ratio (with Mitsui Chemicals holding 65% and Idemitsu Kosan holding 35%), as well as factors such as the assets of both parties and future business plans, the final ratio is expected to be adjusted to Mitsui Chemicals 52%, Idemitsu Kosan 28%, and Sumitomo Chemical 20%.

The new system will increase polypropylene production capacity to 1.59 million tons per year and polyethylene to 720,000 tons. The total sales are expected to reach 387.3 billion yen in fiscal year 2024.

During the online press conference that day, Mitsui Chemicals President Osamu Hashimoto stated that regarding this business integration, "We have conducted extensive and in-depth discussions on business resources and the future direction of green development." He emphasized that by 2027, the business primarily focused on petrochemicals will be spun off. "In the process of advancing towards becoming a leading company in basic and green materials representing Japan, this integration of the polyolefin business will be a core strategic initiative to achieve this goal."

Through corporate integration, the three companies are working together with the aim of saving 4 billion yen through production capacity optimization, 2 billion yen through the integration of product lines and production rationalization, and 2 billion yen through reductions in administrative expenses, for a total target of over 8 billion yen in savings. Regarding production optimization, “The three companies will conduct various simulations based on future demand trends and have agreed to additionally cease production of the PP1 series and PE1 series,” said Mr. Kazuya Ize, Executive Officer of Mitsui Chemicals.

In addition, the three companies will enhance their capability to develop environmentally friendly products and accelerate the advancement of a sustainable green chemistry business.

Since the 1990s, amid the consolidation and elimination efforts by domestic polyolefin manufacturers in Japan, Mitsui Chemicals and Sumitomo Chemical established a joint venture, Mitsui Sumitomo Polyolefins, in April 2002. However, merger negotiations between the two parent companies failed to reach an agreement, and the joint venture was dissolved in October 2003. Subsequently, Mitsui Chemicals and Idemitsu Kosan jointly established Prime Polymer, focusing on polypropylene (PP), linear low-density polyethylene (LLDPE), and high-density polyethylene (HDPE) as their main products, targeting the domestic Japanese market.

However, due to population decline and changes in lifestyle habits leading to a reduction in domestic demand, it is expected that Japan's domestic demand for polyolefins will further decrease in the future, while the number of production companies (and their capacities) remains relatively high. Currently, the domestic demand for polypropylene (PP), linear low-density polyethylene (LLDPE), and high-density polyethylene (HDPE) is about 4 million tons, and it is expected to shrink to around 3 million tons by 2050. Kazumasa Ize, an executive at Mitsui Chemicals, stated, "In order to effectively conduct business in a continuously shrinking market, we must study this issue."

As a material widely used in the industry, it must be supplied continuously and stably. At the same time, to help achieve future carbon neutrality and a circular economy, promoting greening is also essential. Prime Polymer and Sumitomo Chemical will not only set up a base in the Keiyo area but also create synergies in developing technologies to reduce environmental impact and enhance the terminal competitiveness of imported products.

The horn of restructuring for petrochemical derivatives has sounded, and PS and PVC will also undergo optimization.

The integration of the polyolefin businesses of Mitsui Chemicals, Idemitsu Kosan, and Sumitomo Chemical will serve as a clarion call for the restructuring of petrochemical derivatives. It is expected that the oversupply situation in China will persist for at least the next few years, and combined with declining domestic demand in Japan, domestic production capacity reductions in Japan are inevitable. In particular, as polyolefins are the largest derivative products, this business integration may become an opportunity to further expand restructuring efforts. The need to accelerate capacity optimization—including upstream raw materials and downstream processing—is not limited to polyolefins but also applies to products such as polystyrene (PS) and polyvinyl chloride (PVC), in order to strengthen competitiveness. An unprecedented wave of restructuring in the petrochemical industry is about to begin.

Approximately 22 months after Mitsui Chemicals and Sumitomo Chemical announced the integration of their polyolefin businesses in November 2023, the three companies, including Idemitsu Kosan, are moving forward with concrete discussions towards Sumitomo Chemical joining Prime Polymer. Despite the incentive of oversupply from China, the importance of polyolefins, which are widely used in medical supplies and packaging materials, was once again recognized during the COVID-19 pandemic. All parties remained mindful of ensuring the stable supply of polyolefins in a more competitive manner, which is crucial for economic security, and eventually reached this agreement.

To enhance competitiveness, it is not only about optimizing production capacity but also leveraging development capabilities that are difficult for competitors to imitate to create functional products. However, there is currently a situation of "overlapping research and development themes" (Mitsui Chemicals President Osamu Hashimoto). In particular, if companies combine technologies and mechanisms dedicated to promoting a circular society and carbon neutrality, it will increase the options for social application and make it easier to gain support from central and local governments.

For example, Mitsui Chemicals and Sumitomo Chemical are working on a group of green chemistry technologies, and they are strengthening cooperation with Idemitsu Kosan, which plans to launch chemical recycling equipment for waste plastics in Chiba by the end of this year, with the hope of further expanding the scope of plastic recycling.

Since many polyolefin production facilities are concentrated in the Chiba area, the idea of corporate integration became easier to realize. Even so, it still took about two years to reach an agreement. Each company urgently needed to accelerate restructuring to ensure the stable supply of petrochemical products indispensable to social life.