12 November 2002 05:31 [Source: ICIS news]
SINGAPORE (CNI)--Mitsubishi Chemical is in talks with Tosoh Corp to merge the two companies' Japanese polyvinyl chloride (PVC) businesses in an effort to improve profitability and domestic competitiveness, according to a Mitsubishi Chemical source.
While a Tosoh source declined to confirm that the two companies were in talks he said that an alliance between the two companies was possible only if the company finds that Mitsubishi's PVC production and conversion costs and labour costs were competitive enough to make the alliance beneficial to Tosoh.
The Mitsubishi source said the talks were expected to conclude by the end of next year.
A merger between Tosoh and Mitsubishi would turn the combined entity into Japan's No1 PVC player with a capacity of 930 000 tonne/year, far outstripping No2 player Shin-Etsu's 550 000 tonne/year of capacity.
However, Shin-Etsu is still the No1 player globally, with a total PVC capacity of 3.2m tonne/year - largely through its acquisitions and expansions in the US and Europe.
For the long term, Mitsubishi is mulling acquisitions in the US and joint-venture projects in China to enable it to compete better with Shin-Etsu on a global scale.
However, a Mitsubishi spokesman said these plans were on the distant horizon.
Mitsubishi has been hit by declining margins and poor demand in Japan. Figures from the Japan Petrochemical Industry Association show domestic demand declined by 8% to 1.5m tonne in 2001 from 2000.
Mitsubishi is the fourth largest PVC player in Japan, operating three PVC plants with a combined capacity of 390 000 tonne/year at Mizushima, Yokkaichi and at Kawasaki through V-Tech, its 60:40 joint venture with Toagosei.
Analysts said an alliance with Mitsubishi Chemical would fit with Tosoh's strategy of enhancing its market share in Japan.
Tosoh announced on 31 October that it would acquire the PVC business of Kureha Chemical Industry as early as the beginning of next year. The acquisition of Kureha's 100 000 tonne/year facility would enhance Tosoh's 23% share of the domestic PVC market by an additional 3%.
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