With China’s production capacity surging, Sumitomo Chemical has decided to withdraw from its caprolactam business

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On April 15, Sumitomo Chemical announced that it had decided to withdraw from its caprolactam business and would close its production facility in Ehime, Japan, by October 2022. 　　Sumitomo Chemical has been producing caprolactam using the liquid-phase method at its Ehime plant since 1965, a history of over 50 years to date. The gas-phase caprolactam plant, which is about to be shut down, began operations in June 2003. 　　In recent years, the number of caprolactam production facilities worldwide has increased, with a particular surge in capacity in China, which has led to declining profits for Sumitomo Chemical. Its liquid-phase caprolactam plant, with an annual production capacity of 95,000 tons, was shut down in 2015. 　　Since then, to improve its operating conditions, Sumitomo Chemical has continuously improved its technology and reduced costs. However, Sumitomo Chemical stated that it would be difficult to maintain competitiveness in its caprolactam business in the future, and therefore decided to withdraw from it. 　　However, Sumitomo Chemical believes that the intermediate materials for caprolactam **are expected to enjoy a stable market environment, and production and sales will continue. 　　At the Ehime plant, Sumitomo Chemical is making active efforts to adapt to changes in the market. In 2018, the plant for producing the feed additive methionine was expanded, and construction began on plants for high-purity chemicals used in semiconductors and liquid crystal polymers (LCP). In addition, to meet the challenges of the carbon-neutral era, Sumitomo Chemical is building a demonstration facility for the chemical recycling of acrylic resins, and will introduce LNG facilities at its plants. 　　According to Japanese media reports, the global annual demand for caprolactam is currently 6 million tons, while the annual supply capacity is 8 million tons, resulting in a surplus in supply. In Japan, UBE (formerly Ubex) and Toray are major caprolactam producers, while the production capacity shut down by Sumitomo Chemical amounts to only 85,000 tons. 　　This is not the first time Sumitomo Chemical has withdrawn from its traditional businesses. Last September, Sumitomo Chemical announced that it would cease the production of 40,000 tons per year of synthetic rubber EPDM at its factory in Chiba, and halt sales by the end of March 2023. 　　Sumitomo Chemical stated that under its medium-term business plan for the 2022–2024 period, which began in April, it will enhance the profitability of its technology-based businesses and promote renewal in its businesses in growing markets. This business withdrawal is in line with such policies and will continue to advance the maturity of the business portfolio. 　　In recent years, Japan’s chemical industry has been accelerating its structural transformation, with exiting traditional petrochemical businesses becoming one of the main options. For example, on March 15, Mitsui Chemicals announced that it would close its purified terephthalic acid (PTA) plant in Otake, Iwakuni, Japan, in August 2023. At the end of 2021, Mitsubishi Chemical decided to withdraw from its petrochemical and coal chemical businesses over the coming years.