Three Major Japan Chemical Giants Announce: Integration of Polyolefin Businesses

Mitsui Chemicals, Idemitsu Kosan, and Sumitomo Chemical jointly announced that they have signed a business integration agreement and a joint venture agreement, intending to merge the core polyolefin (PO) businesses of the three companies within Japan. This collaboration is based on the previously signed memorandum of understanding and marks a critical step for the three companies in integrating their polypropylene (PP) and polyethylene (PE) businesses, aiming to enhance competitiveness in the Japanese market.

The integration will focus on Prime Polymer Co., Ltd. (PRM), a joint venture between Mitsui Chemicals and Idemitsu Kosan, and will consolidate Sumitomo Chemical's domestic polypropylene (PP) and linear low-density polyethylene (LLDPE) businesses in Japan. According to the agreement, Sumitomo Chemical will transfer its domestic PP and LLDPE businesses in Japan to PRM through a two-stage absorption-type company split.

In the first phase, under the premise of divesting production functions, Sumitomo Chemical will acquire a 20% stake in PRM. After the equity adjustment, Mitsui Chemicals will hold 52%, Idemitsu Kosan will hold 28%, and Sumitomo Chemical will hold 20%. The second phase is planned to be implemented before April 2027, at which time production-related assets and liabilities will be transferred, with specific financial terms to be determined.

The integration requires relevant regulatory approval and antitrust law permits. The first phase is expected to start on July 1, 2026, and the second phase will proceed on April 1, 2027.

After the integration, the joint venture company's annual PP production capacity will increase from 1.26 million tons to 1.59 million tons, and the PE production capacity will rise from 550,000 tons to 720,000 tons. The consolidated net sales for 2024 are expected to reach 387.3 billion yen (approximately 2.4 billion USD), highlighting the scale of the integrated business.

Three companies stated that the demand for polyolefins accounts for about half of Japan's total plastic demand and is crucial for industries such as automotive, electronics, and medical devices. Despite previous rounds of consolidation in the industry, overcapacity remains a major challenge due to declining domestic demand caused by demographic changes and shifts in lifestyle.

The purpose of this integration is to optimize the polyolefin production system, with the goal of achieving annual cost savings of over 8 billion yen. At the same time, the three companies also plan to accelerate the development of high-performance and environmentally friendly products.