Japanese Chemical Giants Look to Merge Plastics Businesses to Tackle Industry Woes

By Megan Cheah

Three major chemicals companies in Japan are joining forces in plastics as they look to compete in an industry facing fading demand and oversupply.

Mitsui Chemicals, Idemitsu Kosan and Sumitomo Chemical have signed a memorandum of understanding to combine some of their businesses in a bid to strengthen their competitiveness as Japan's appetite for plastic wanes.

Under the proposal, the three Tokyo-listed companies would integrate Sumitomo Chemical's polypropylene business and linear low-density polyethylene business with the polyolefin business of Prime Polymer, a joint venture between Mitsui and Idemitsu.

Polyolefins are versatile plastics with a wide range of usage, including packaging like bubble wrap and firmer products like pipes. They account for about two-thirds of global plastic production but the industry faces challenges from sustainability initiative to reduce plastic use.

According to the release from Mitsui, Idemitsu and Sumitomo Chemical, polyolefins make up roughly 50% of plastics demand in Japan but players are battling a supply glut.

"Although domestic manufacturers have undergone mergers and consolidations since the 1990s, the issue of oversupply has yet to be resolved," the companies said Wednesday.

A shrinking market caused by population decline and changes in lifestyle is set to further dilute demand for domestically-made polyolefins, they added.

By combining their businesses, the trio aim to optimize production, targeting cost rationalization of more than 8 billion yen a year, or about $54.3 million. They will also push forward with efforts to develop environmentally conscious products.

The post-integration ownership structure could see Mitsui hold a 52% share, with Idemitsu having 28% and Sumitomo Chemical taking 20%. However, details are preliminary and final decisions have yet to be made.

The two target businesses had sales of 387.3 billion yen in the last fiscal year.

Shares of Sumitomo Chemical were recently up 0.2%, while Mitsui and Idemitsu were down 0.9% and 0.4% respectively.

The deal could be finalized by April 2026, pending discussions.

Write to Megan Cheah at megan.cheah@wsj.com