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Japanese firms finish tough fiscal year

Major chemical companies are emphasizing structural reform and low-carbon production

by Katsumori Matsuoka, special to C&EN
May 17, 2024

A chemical facility in Japan.
Credit: Mitsui Chemicals
Mitsui Chemicals is closing this phenol plant in Japan.
Japan's 2023 results
A table of earnings from Japanese chemical companies shows that five of six companies posted sales decreases.
Sales for 2023 fell at most leading chemical companies in Japan.
Source: C&EN tabulations based on company documents.
a Not applicable because there was a loss in the previous fiscal year.

Japan’s major chemical companies are working on structural reforms and stronger cooperation as ways to reverse their poor performance in commodity chemicals. But for now they are struggling, as results for the 2023 fiscal year show.

Sumitomo Chemical posted a loss of over $2 billion in the fiscal year, which ended March 31, while Mitsui Chemicals posted a second consecutive year of profit decline. Asahi Kasei turned around from a loss in 2022, but its profit was only half its earlier forecast. Mitsubishi Chemical Group reported a boost in profit but a decrease in sales.

All four of these companies recorded write-downs, mainly in commodity chemicals, to account for businesses that have fallen in value. Sumitomo posted a $1.7 billion write-down, and Asahi Kasei reported one of $376 million on its commodity petrochemical and resin facilities as part of a total write-down of $853 million.

Mitsubishi recorded $602 million in write-downs in the 2022 fiscal year and another $153 million in fiscal 2023. In addition, the company will record $258 million in such losses this fiscal year, for reasons including the suspension of methyl methacrylate and acrylonitrile production in Hiroshima, Japan, and the restructuring of the phenol business in Kurosaki, Japan, Minoru Kida, chief financial officer, said at a press conference.

Mitsui recorded a $156 million write-down in fiscal 2023, triple the one it posted in the previous year.

Japan’s major chemical companies are all increasing investment in the specialty chemical sector while restructuring ailing businesses in ethylene and other commodity chemicals.

“The utilization rate of ethylene production facilities was above the break-even point until 2021, but it is currently below that point,” says Mikiya Yamada, a stock analyst at Mizuho Securities. “The excess production capacity needs to be eliminated in some way.”

Hajime Nakajima, Mitsui’s chief financial officer, said at a press conference on earnings that “the utilization rate of ethylene centers will not reach 80% this fiscal year.”

To fix the problem, chemical companies want to collaborate to both reorganize ethylene centers and build carbon-neutral complexes.

In Japan’s Chiba region, major firms plan to optimize their ethylene production capacity. As a first step, Mitsui and Idemitsu Kosan are considering suspending production at one of the two ethylene crackers they separately operate and concentrating on a single unit. Mitsui and other companies in the Chiba district also intend to build a carbon-neutral complex.

In western Japan, Mitsui, which operates an ethylene center in Osaka, and Mitsubishi and Asahi Kasei, which jointly operate a cracker in Mizushima, recently announced that they will jointly study the conversion of their facilities from fossil fuels to biomass or other low-carbon feedstocks.

At earnings press conferences, executives made clear that the shift to low-carbon production would be accompanied by a decrease in production capacity. “We will not go green in its current form but rather promote discussions on an optimal system and greening,” said Toshiyasu Horie, primary executive officer of Asahi Kasei. “We would like to set a basic direction as early as possible in fiscal 2024.”


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