Japan's major petrochemical producers Sumitomo Chemical and Prime Polymer plan to integrate their domestic polyolefin production businesses to optimise operations and increase competitiveness.
The companies agreed on 10 September that Sumitomo Chemical will buy a 20pc stake in Prime Polymer — a joint venture between Mitsui Chemicals and Idemitsu. This will leave Mitsui Chemicals and Idemitsu with 52pc and 28pc stakes, respectively.
Financial terms of the deal have not been finalized yet. Mitsui Chemicals currently owns 65pc of Prime Polymer and Idemitsu 35pc.
Sumitomo Chemical's domestic polyolefin production businesses, including polypropylene (PP) and linear low-density polyethylene (LLDPE), will be integrated with Prime Polymer's domestic PP, LLDPE and high-density polyethylene (HDPE) businesses and its overseas LLDPE manufacturing businesses. The integration is expected to be completed by April 2026.
Following the integration, Prime Polymer will have a total output capacity of 1.59mn t/yr for PP and 720,000 t/yr for PE. Sumitomo Chemical's Chiba plant in the eastern Chiba prefecture will also be operated by Prime Polymer.
Prime Polymer currently has a production capacity of 1.26mn t/yr for PP and 550,000 t/yr for PE. It owns the Ichihara and Anegasaki plants in Chiba and the Osaka plant in the western Osaka prefecture. The company also jointly owns the Tokuyama PP plant in Yamaguchi prefecture with fellow petrochemical firm Tokuyama.
Sumitomo Chemical and Prime Polymer decided to optimise their polymer production to overcome the current oversupply and weak demand in the domestic market. Changes in lifestyle have exacerbated the decline in Japan's plastics demand, while cheaper imports have added to oversupply.
The companies also aim to improve profitability of their basic petrochemical businesses by enhancing PE production to strengthen operation of crackers generating PE feedstock ethylene. The partners also target to accelerate their carbon-neutral projects, such as recycled polymers and biomass-based products, through technological collaboration and by combining sales channels to secure off-takers. The integration is also expected to help waste collection for recycled plastic production, Mitsui Chemicals said.
Capacity reductions unavoidable
Optimisation and capacity reduction for polyolefin are unavoidable, Mitsui Chemicals said.
The firm expects domestically produced PP demand in Japan to drop to 1.5mn t/yr in 2050 from 1.93mn t/yr in 2024. The domestic market will have 1.12mn t/yr of PP overcapacity by 2050 if Japan continues to produce at its current capacity of 2.62mn t/yr. The company expects LLDPE demand to fall to 450,000 t/yr in 2050 from 580,000 t/yr in 2024, which means there will be 490,000 t/yr of overcapacity by 2050 without a capacity cut. Japan's current LLDPE output capacity is 940,000 t/yr. For HDPE, the company forecasts demand to drop to 450,000 t/yr in 2050, from 590,000 t/yr in 2024. Japan's current HDPE output capacity is 1.1mn t/yr so domestic producers will need to manage 630,000 t/yr of overcapacity in 2050 if output is not cut.
Mitsui Chemicals is considering scrapping one PE and one PP production line in the future to further optimise its polyolefin business.
The Japanese petrochemical industry has had to curb its polyolefin output capacities in Japan and overseas as global competition has intensified, especially from Asian and Middle Eastern producers. They have tried to optimise domestic ethylene cracker operations by lower run rates in line with weaker demand.
Sumitomo Chemical and Cosmo Energy have agreed to scrap an ethylene cracker in Chiba prefecture in the April 2026-March 2027 fiscal year. Eneos is also considering permanently shutting down one of its two ethylene crackers in the eastern Kanagawa prefecture by the end of 2027-28.
Average cracker operating rates have been decreasing and have remained below 90pc since August 2022, data from the Japan Petrochemical Industry Association show. The operating rates during January-July averaged 77.1pc, down by 3.4 percentage points from the same period a year ago.
