The three major chemical companies jointly announced: integration of their polyolefin businesses

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Japan’s petrochemical industry is undergoing a comprehensive transformation. The latest news is that Mitsui Chemicals, Sumitomo Chemical, and Idemitsu Kosan have announced plans to merge their polyolefin businesses by April 2026. On September 10, these three Japanese chemical giants jointly announced that they had signed a memorandum of understanding to integrate the polyolefin business operated by Prime Polymer Co., Ltd. (referred to as “PRM”), which is jointly invested in by Mitsui Chemicals and Idemitsu Kosan, with Sumitomo Chemical’s polypropylene and linear low-density polyethylene (LLDPE) businesses in Japan. Polyolefins account for about 50% of Japan’s plastic demand and are crucial to Japanese industry. Although Japanese polyolefin manufacturers have undergone mergers and consolidations since the 1990s, the problem of overcapacity has yet to be resolved. The three companies said that demand for polyolefins is expected to decline further in the future, due to a shrinking market demand resulting from Japan’s declining population and changing lifestyles. The details of the integration have not yet been finalized, but the three companies are initially considering transferring Sumitomo Chemical’s polypropylene and LLDPE businesses in Japan to PRM, while acquiring a stake equivalent to 20% of PRM’s shares. This would result in an ownership structure of 52% for Mitsui, 28% for Idemitsu Kosan, and 20% for Sumitomo Chemical. PRM is a joint venture established in 2005 by Mitsui Chemicals and Idemitsu Kosan, with an annual production capacity of 1.26 million tons of polypropylene and 550,000 tons of polyethylene; it is a major producer of polyolefin products in Japan. The integration plan is scheduled to be implemented in April 2026; after integration, PRM’s production capacity will increase to 1.59 million tons per year for polypropylene and 720,000 tons per year for polyethylene, with net sales amounting to approximately 387.3 billion yen (about 18.7 billion yuan). According to data from Japan’s Ministry of Economy, Trade and Industry, as of the end of last December, Japan’s total production capacity for polyolefins was 5.83 million tons. Once Sumitomo Chemical’s polypropylene and LLDPE businesses are integrated into PRM, they will account for over 30% of the country’s plastic production capacity. Through business integration, Mitsui, Idemitsu, and Sumitomo Chemical will work together to optimize the production system for purchase orders, with the goal of achieving cost savings of over 8 billion yen per year. Furthermore, by enhancing their ability to develop high-performance, environmentally friendly products, the three companies will accelerate the development of their sustainable green chemistry business. In recent years, weak domestic demand in Japan has weighed on the petrochemical industry, resulting in a decline in the production of petrochemical products in Japan in 2024 compared to previous years. Among them, the average operating rate of naphtha cracking units has been declining continuously, dropping to a record low of 75% in June this year. Against this backdrop, Japanese companies have accelerated the integration of the traditional petrochemical industry. For example, Asahi Kasei, Mitsui Chemicals, and Mitsubishi Chemicals jointly announced on September 1 the establishment of a partnership to explore the creation of a joint operating entity aimed at optimizing the ethylene production facilities of the three companies in western Japan ； Idemitsu Kosan will shut down its ethylene production facility in Chiba ； Maruzen Petrochemical is also closing its Chiba ethylene plant, while optimizing the Keiyo Ethylene Plant, which is a joint venture with Sumitomo Chemical.