Mitsui Chemicals closes Ichihara phenol plant by 2026 due to challenging market conditions. The Basic & Green Materials sector aims for sustainability with alternative materials, ensuring supply stability for customers.

JAPAN: Mitsui Chemicals, Inc. has made the decision on 04, April 2024 to close its phenol plant located at the Ichihara Works by the end of fiscal year 2026.

The Basic & Green Materials Business Sector of the Mitsui Chemicals Group, which includes the phenol business, is undergoing a transformation into a sustainable green chemicals enterprise focused on competitive derivatives. This move follows the Group's initiatives to optimize production in line with demand, a strategy initiated after the 2008 global financial crisis. The Group is intensifying these efforts in a second phase of restructuring, which includes the recent announcement of the plant closure.

Mitsui Chemicals currently operates phenol production facilities in three locations: Ichihara in Chiba, Takaishi in Osaka, and Shanghai in China. The phenol business has historically expanded since the launch of production at the Ichihara Works in 1970, driven by demand for key derivatives like bisphenol A and phenolic resin. However, challenges have arisen since 2022, including a decline in domestic demand and oversupply due to new production facilities in China and other parts of Asia. Mitsui Chemicals has implemented various rationalization measures to sustain the business, but profitability required to maintain phenol production at the Ichihara Works is no longer viable.

Consequently, an impairment loss on fixed assets for this business segment has been recorded as other operating expenses.

While the phenol plant at the Ichihara Works will cease operations, Mitsui Chemicals plans to ensure a continuous supply of products to its customers by establishing a phenol chain with high capital efficiency and stable profitability. 

The Basic & Green Materials Business Sector of Mitsui Chemicals supplies materials to various industries that are integral to society. Moving forward, this sector will pursue a transition to green chemicals by exploring alternatives such as bio-based hydrocarbons and chemical recycling in place of petrochemical raw materials. These initiatives aim to facilitate a green shift in key industries where Japan has global competitiveness, such as semiconductors, automobiles, and pharmaceuticals, contributing to the development of a sustainable society.

According to TechSci Research, the closure of Mitsui Chemicals' phenol plant at the Ichihara Works by 2026 is poised to have a notable impact on the global chemicals market. This move reflects broader trends and challenges facing the industry, indicating potential shifts in supply dynamics and market competitiveness.

The global chemicals market is highly interconnected, with supply and demand dynamics influenced by various factors including production capacity, economic conditions, and regulatory changes. Mitsui Chemicals' decision to close the plant comes amidst a backdrop of evolving market conditions, including declining domestic demand in Japan and oversupply issues driven by increased production capacities in China and other parts of Asia.

One significant impact of this closure is the reduction in global phenol production capacity. With the Ichihara plant producing 190,000 tons per year, its closure will tighten the supply of phenol in the market. This reduction could lead to increased prices for phenol and its derivatives, affecting industries reliant on these chemicals such as automotive, electronics, and construction.

Furthermore, the closure reflects a broader trend within the chemicals industry towards sustainability and green practices. Mitsui Chemicals' focus on transitioning to a sustainable green chemicals business underscores the industry's shift towards eco-friendly alternatives and practices. This move aligns with global initiatives to reduce carbon footprints and mitigate environmental impact.

In terms of market competitiveness, Mitsui Chemicals' restructuring efforts could lead to increased competition among remaining producers. As companies adjust their strategies in response to market changes, there may be opportunities for other players to expand their market share. Additionally, the closure could prompt other companies to reassess their own production capacities and business models, potentially leading to further industry consolidation or strategic partnerships.