Japanese chemical giants are joining forces in the plastics sector to strengthen their competitiveness amid challenges from shrinking demand and oversupply, reported WSJ.
Mitsui Chemicals, Idemitsu Kosan, and Sumitomo Chemical have signed a memorandum of understanding to merge certain operations, aiming to improve their market standing as demand for plastics in Japan continues to decline.
The proposal outlines that the three Tokyo-based companies will combine Sumitomo Chemical’s polypropylene and linear low-density polyethylene operations with Prime Polymer’s polyolefin business, a joint venture between Mitsui and Idemitsu.
Polyolefins, a versatile plastic used in everything from packaging materials like bubble wrap to more rigid products like pipes, account for around two-thirds of global plastic production. However, the industry faces growing challenges from sustainability initiatives aimed at reducing plastic consumption.
According to the release from Mitsui, Idemitsu, and Sumitomo Chemical, polyolefins represent roughly 50% of plastic demand in Japan, but the industry is grappling with an oversupply.
‘Although domestic manufacturers have undergone mergers and consolidations since the 1990s, the issue of oversupply remains unresolved,’ the companies said on Wednesday.
They further added that Japan’s declining population and changing lifestyles will continue to dampen demand for domestically produced polyolefins.
The three companies plan to merge their operations to streamline production, targeting annual cost savings of over eight billion yen (around $54.3 million). In addition, they will focus on developing environmentally friendly products.
Under the proposed ownership structure after the merger, Mitsui would hold a 52% stake, Idemitsu 28%, and Sumitomo Chemical 20%. However, these details are still preliminary, and final decisions have yet to be made.
The two target businesses reported sales of 387.3 billion yen in the previous fiscal year. Recently, Sumitomo Chemical’s shares rose by 0.2%, while Mitsui and Idemitsu saw declines of 0.9% and 0.4%, respectively.
The deal is expected to be finalized by April 2026, pending further discussions.
