Mitsui Chemicals, a leading Japanese chemical conglomerate, recently announced plans to transfer its 50% equity stake in Shanghai Sinopec Mitsui Chemicals Co., Ltd. (SSMC) to Shanghai Gaoqiao Petrochemical under Sinopec Group.
The transaction is scheduled to close in October the same year, upon which SSMC will become a wholly-owned subsidiary of Shanghai Gaoqiao Petrochemical.
The deal has drawn widespread attention across the chemical industry, as it represents far more than a routine equity transfer; it signals drastic shifts within the petrochemical sector and strategic restructuring among multinational chemical corporations.
According to Tianyancha, SSMC was established as a 50-50 Sino-Japanese joint venture. Mitsui Chemicals held the Japanese share, while Sinopec originally owned the Chinese stake, which was transferred to its subsidiary Shanghai Gaoqiao Petrochemical in 2016. Founded in 2006, SSMC specializes in phenol, acetone and bisphenol A (BPA). Its existing BPA production capacity stands at 120,000 tons per annum, and its Phase II plant can produce 250,000 tons of phenol and 150,000 tons of acetone annually.
Nevertheless, the time-honored joint venture has posted net losses for two consecutive fiscal years, with a deficit hitting 10.6 billion Japanese yen in fiscal 2024. Mitsui Chemicals attributed the losses to explosive capacity expansion in China’s domestic market. China’s total phenol capacity is projected to exceed 8 million tons in 2025, and excess supply has crashed the spot price in East China from CNY 12,000 per ton down to merely CNY 6,500 per ton, pushing the entire industry below the cost line.
Against this backdrop, Mitsui Chemicals is streamlining its basic chemical business portfolio with a string of moves:
Mitsui Chemicals stated these adjustments aim to reallocate resources and focus on high value-added products, such as high-refractive-index lens monomers that have long supplied renowned global lens manufacturers. The strategy of scaling back basic chemicals while expanding high-end specialty materials will continue in the future. It is foreseeable that Mitsui Chemicals will further concentrate on high-margin businesses to tackle industry headwinds.
The founding of SSMC marked a key strategic layout by Sinopec Group.
At the start of the new century, China’s economy entered a rapid growth phase driven by accelerated industrialization and urbanization. Booming automotive, electronics, textile and other industries triggered surging demand for fundamental petrochemical feedstocks. Phenol, acetone and BPA served as three core raw materials in this supply chain: phenol is processed into phenolic resin and BPA, further used in daily necessities, home appliances and auto parts; acetone acts as a vital precursor for solvents, plastic additives and pesticides.
Around 2006, only four domestic manufacturers (Yanshan, Gaoqiao, Jilin and Huayu Harbin) could produce the three products above, with small-scale, outdated facilities lagging international technology by a full generation. As a result, China relied on imports for more than 40% of its phenol and acetone supplies, and over 80% for BPA. The severe supply gap made domestic localization an industry-wide priority, paving the way for the establishment of SSMC.
Eighteen years on, China’s production capacity has undergone tremendous growth. In 2024, domestic output reached 6.81 million tons for phenol, 3.30 million tons for acetone and 6.01 million tons for BPA. Phenol and acetone have basically achieved self-sufficiency, and BPA is expected to eliminate import dependence around 2026.
However, large capacity does not equal strong competitiveness. For a long time, core production processes and catalysts for SSMC were monopolized by Covestro, Dow and Mitsui Chemicals, leading to annual patent royalties exceeding CNY 100 million. A turning point arrived in 2023: Sinopec’s self-developed BPA catalyst cut production costs by 60%, slashing annual patent expenditure by over CNY 100 million. SSMC has since broken reliance on Japanese catalyst technology and formed a complete independent technological loop.
Geographically, Shanghai Gaoqiao Petrochemical and SSMC are merely 10 kilometers apart. Gaoqiao supplies pure benzene upstream, while SSMC manufactures phenol, acetone and BPA downstream, enabling seamless industrial chain integration and near-zero logistics costs. This equity adjustment executes Sinopec’s strategy to supplement, extend and strengthen its industrial chain, and equips SSMC with dual advantages in cost and technology to maintain stable operation amid the industry-wide capacity surplus cycle.
Mitsui Chemicals’ divestment stems from profound structural shifts in the worldwide petrochemical landscape.
China has witnessed explosive expansion in refining and petrochemical capacity in recent years, surpassing the United States to become the world’s largest crude oil refining nation and ethylene producer.
This capacity boom has elevated the Asia-Pacific region to the core hub of global refining and chemical industries. Surging exports of low-cost ethylene derivatives from China have exerted substantial competitive pressure on established chemical markets in North America and Europe.
A tangible consequence is that global chemical giants have frequently shut down outdated facilities in the past two years. For instance, ExxonMobil recently closed its 425,000 t/a ethylene cracker in France, which failed to spread fixed costs via economies of scale.
Notably, China’s chemical sector growth relies not only on capacity scale but also remarkable technological breakthroughs:
These import substitution achievements have proliferated across chemical subsectors, demonstrating robust innovation capacity of Chinese chemical enterprises, injecting strong momentum into industrial development and steadily lifting China’s standing in the global petrochemical arena.
Even with these milestones, China’s chemical industry still faces multiple bottlenecks in high-end segments. The self-sufficiency rate of POE elastomers stands below 20%, with ongoing R&D efforts underway at Wanhua Chemical after the launch of its first-phase plant; electrical-grade polypropylene for ultra-high voltage insulation remains 100% import-dependent, with joint R&D teams led by Sinopec racing to achieve breakthroughs.
Resolving these technological choke points is an inevitable step for China’s chemical industry to evolve from large-scale expansion to high-quality development. Once bottlenecks analogous to the BPA catalyst issue are fully resolved, China’s chemical sector will accomplish full industrial upgrading and secure a more pivotal position in global industrial competition.
