Mitsui Chem to team with Saudi firm in urethane business

TOKYO (Nikkei) -- Mitsui Chemicals Inc. (4183) plans to produce urethane materials in Saudi Arabia together with the Middle East's largest materials maker, The Nikkei learned Friday.

The Japanese chemical manufacturer and Saudi Basic Industries Corp. will spend 30-50 billion yen to build a large plant over 2015 to 2020. Sabic will lead construction efforts, while Mitsui Chemicals will offer manufacturing technology and oversee plant operations. The two firms, which are expected to agree on their collaboration by the end of March, could also set up a joint venture.

The new plant will likely have an annual output capacity greater than the 427,000 tons of Mitsui Chemicals' three factories combined. Mitsui Chemicals, which is a major producer in the domestic market that rivals Tosoh Corp. (4042), has two facilities in Japan and one in South Korea.

Domestic sales of urethane, which is used in automobile and housing construction materials, are in the doldrums. Mitsui Chemicals' urethane business, hurt by the yen's strength, is expected to post a 13.5 billion yen operating loss for the current fiscal year. Slated to suffer three straight years of red ink, the business is in urgent need of a drastic overhaul.

Mitsui Chemicals will purchase a portion of the new plant's output at a low cost to expand its sales channels to India, China and other emerging markets.

Sabic, a comprehensive materials manufacturer 70%-owned by the Saudi government, is focusing on nurturing its chemical business using cheap crude oil and byproduct gas. By teaming up with Mitsui Chemicals, it will roll out urethane materials for the first time.

(The Nikkei Feb. 25 morning edition)