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Trading titans: How Sojitz Pla-Net shapes the future of synthetic resins

Interview - December 6, 2023

Exploring Market Resilience, Environmental Commitment, and Global Expansion Strategies in the World of Petrochemicals

KENICHI ARIGA, PRESIDENT OF SOJITZ PLA-NET CORPORATION
KENICHI ARIGA | PRESIDENT OF SOJITZ PLA-NET CORPORATION

Over the past three decades, regional competitors like China, Korea, and Taiwan have emulated the Japanese model of success, often doing so at lower costs. Despite this stiff price competition, many Japanese firms, particularly in niche manufacturing and trading sectors, have managed to maintain leadership positions. As a trading firm, could you share insights into how Japanese companies are able to sustain their leadership and competitiveness in these niche fields, even in the face of intense pricing competition from regional rivals? 

Sojitz Pla-Net Corporation is a trading company dedicated to synthetic resins.

Let me start with what functions trading companies provide chronologically based on the history of the petrochemical industry in Japan

Before the 1950s, Japan could only import raw materials from abroad and synthesize them together. Petrochemical trading companies played a key role in learning about technologies and materials from overseas markets, mainly Europe and the US, and bringing them to Japan to introduce them to the market.

In 1957, METI set up a group called the Japan Petrochemical Industry Association (JPCA). After that, we saw the first petrochemical complex in Iwakuni, Yamaguchi prefecture, and it later expanded throughout Japan. When we started producing more domestically, we began distributing to overseas markets. This was the role of trading companies in the 1980s.

In 1985, the Plaza Accord was established, leading to a strengthening of the Japanese yen. This event prompted a realization that relying solely on exports would not be sustainable. Consequently, we initiated a shift in our production strategy towards overseas operations, and this transformation persisted throughout the 1990s. During this period, trading companies played a crucial role in supporting the expansion of manufacturing companies abroad by optimizing various functions. As a result, our expansion into overseas markets was executed successfully.

Later on, as new industrial powers like South Korea, China, and Taiwan emerged, Japan gradually shifted its focus from general commodities to high-value products, particularly advanced technologies and niche markets. In our petrochemical business, especially concerning synthetic resin, we decided to step away from competing in commodities due to pricing disparities. Instead, we redirected our efforts towards high-value products. As a trading company, it's our responsibility to constantly explore new possibilities and fields demanding greater expertise while opening domestic markets.

History shows trading companies took the role of a bridge, connecting customers' needs with suppliers' products, be it goods, services, or technology. This basic could remain unchanged.  I believe our activities have supported the growth of Japanese manufacturing and we must contribute to further growth and success of Japanese manufacturing with full use of our variety of functions in this new era. Of course, we shall apply the same to global manufacturing, as well.

Trading companies encompass five major functions. We generate profit through trading and investment. The first revolves around management, including administrative tasks such as corporate management, accounting, finance, risk management, and legal oversight. The second function focuses on sales, involving market development, market creation, conventional marketing sales, and logistics. The third function covers procurement, including the logistics aspect. In the fourth function, we handle finance, where we can either co-invest or arrange loans for substantial projects. Institutional finance, such as JBIC, NEXI or Official Development Assistance (ODA), holds particular significance, along with trade finance. The fifth function involves the arrangement of technology, encompassing the introduction and organization of operations and maintenance (O&M). Notably, we operate not only as traders but even as manufacturers.

In 2020, we faced another period of change, especially within our industry. The focus has now shifted significantly towards environmental preservation. Many individuals and businesses are deeply concerned about carbon neutrality and the concept of a circular economy. We anticipated such a trend and have started handling “I’m Green Polyethylene®” (“Green Polyethylene”) by Braskem S.A.(“Braskem”), Mid/South America’s largest petrochemical company and only one biomass-based polyethylene producer in the world as of today, since 2012. This is 100% made from an inedible by-product of the overwhelming-sized Brazilian sugar industry, “sugarcane waste molasses” which has a much more stable supply than other major biomass feedstocks. We spent time and labor in discovering such an opportunity or product, finding an application or the way of utilizing such premium costly material, and finally formed today’s biomass-based plastic resin market in Japan.

Today, recycled synthetic resins are also anticipated. In our environmental business efforts, we are integrating the first and fourth functions, along with sales and procurement arrangements, to drive business growth. Regarding investments in our trading company, our approach mirrors the model we adopted for petrochemicals in the 1950s. Europe boasts advanced technologies in the environmental sector. Similar to our historical practices, we aim to import cutting-edge technologies and facilities from Europe to Japan. When it comes to investing in materials, our focus is on reducing plastic usage and transitioning to plant-based materials. We aim to introduce and make these options accessible to the Japanese industry.

Biomass-based polyethylene is more costly than its petrochemical counterpart. Given the price sensitivity of the Asian market, we invested considerable time and effort in creating and developing this market. I firmly believe that part of our role involves suggesting policy changes to related Japanese Ministries, such as METI and MOE. Currently, we are advocating for the replacement of petrochemical products with biomass or recycled plastics due to their eco-friendly nature. At Sojitz, our guiding principle is “New way, New value”. We are dedicated to anticipating and meeting our clients’ diverse needs in services, technology, or products. This is the very essence of being a trading company. Regardless of the country or region, we must remain flexible, adapting to global situations and providing precisely what our clients need. Understanding these needs and delivering on them is fundamental to our role as a trading company that facilitates the establishment of businesses.

 

 The concept of carbon neutrality is significant not only in Japan but also in the US, Europe, and many other countries. Japan, aiming to achieve carbon neutrality by 2050, emphasizes this goal. As a company deeply committed to carbon neutrality, how do you plan to support the countries where you currently operate in their pursuit of carbon neutrality?

To support carbon neutrality, we are actively increasing the use of biomass resin. Additionally, we are promoting recycling initiatives. Recognizing the varied systems and needs in different countries, our aim is to provide tailored value to each region, extending beyond Japan.

Amongst eco-friendly resins, we have three types, that is, biomass-based and bio-degradable, and recycled.  The most eco-friendly option is to recycle biomass-derived resins repeatedly not waste them. This is why I pursue biomass-based resin sales and recycling business. Bio-degradable has a big benefit which returns to the soil. But it emits CO2 in the bio-degrading process. Recycling bio-based resins with less CO2 emission recycling methods is ideal. But we cannot adapt this to all cases and have to combine various options in practice.

Taking this opportunity, let me show examples of our business activities contributing to carbon neutrality. Firstly, I show Green Polyethylene by Braskem as a notable instance. I already mentioned above that this is a product by Braskem and we have been selling it in the Asian market since 2012. Over 10 years of experience enables us to foster liability trusting relationships with environment-conscious business partners. This is our precious intangible asset.

As the feature of Green Polyethylene, I emphasize CO2 absorption. Its CO2 absorption in the cultivating process of sugarcane exceeds CO2 emission in the processes of polymerization and transportation to the market. In addition to that, Green Polyethylene is from inedible raw material. This is another great benefit.

Amongst our recycling businesses, PET bottle cap recycling would be a familiar instance. Sojitz Pla-Net Corporation, Asahi Group Japan, Ltd., and Nippon Closures Co., Ltd. have formed a consortium to pursue the “Cap to Cap” initiative, which aims to enable horizontal recycling of PET bottle caps. This initiative marks a first in Japan. We utilize advanced European facilities for material recycling, carefully selecting and introducing these technologies to establish a sustainable business. The more advanced state of these facilities in Europe can likely be attributed to stringent regulations in those countries. Here Sojitz Pla-Net Corporation enables the adaption of European technology and facilities in compliance with Japan’s regulations, standards, and market requirements by executing technology research and evaluation, regulation research, and best recycling process simulation from cost performance aspect.

 

With the global network of Sojitz at your disposal for conducting overseas business, and your existing presence in China and the US, which regions do you believe hold the most significant growth potential for your company in the future? Additionally, are you contemplating engaging in mergers and acquisitions, joint ventures, or partnerships to further your business endeavors?

Currently, we have established a presence in approximately 30 locations worldwide. As a specialized trading company in synthetic resin, we stand out as the rare one with a physical presence in the West. In these locations, we provide packaging solutions incorporating Japanese technology. Notably, we have operational sites in Finland and Canada.

It is hard to say which regions will have remarkable growth generally as it all depends upon product and industry. This is simply because we do business in almost all plastic resin-related markets. We encompass it with two business segments, one “Packaging Segment” which handles plastic packages and our raw materials, and another “Industry Segment” which handles plastic resins and its processed products for industries other than packaging, such as automotive, electronics, home appliances, gaming, office-automation, housing equipment, toys, and so forth.

In the industrial sector, our primary focus lies in Asia, particularly in China. The majority of our profits are generated from this region. Looking ahead, our strategic focus might vary depending on specific business demands. At present, we do not have a fixed focus area due to the diversity of our business portfolio. Our market expansions are contingent on demand, adapting and moving into different markets as per the needs of the industry.

Currently, our primary focus is on promoting environmental sustainability. We aim to achieve success in our Japanese investments and subsequently expand our initiatives overseas, particularly in the realm of recycling.

With respect to biomass resin, we initially ventured into the packaging industry. The Braskem product, green biomass resin, was initially utilized in packaging applications. However, it also finds application in other sectors such as home appliances, toys, office equipment, and safety features in automobiles. ABS resin (Acrylonitrile Butadiene Styrene Co-Polymer) is an example. It is typically used for the housing of toys and home appliances. We developed a blending method to mix Green Polyethylene with ABS to widen the potential market for Green Polyethylene by giving bio-contents to ABS. We expect to sell it mainly to China, Southeast Asia, and Southwest Asia,

PTP (Press Through Pack) sheet is another unique product that we co-developed with our partner. We applied Green Polyethylene to add bio-contents to PTP.

Biodegradable resins have a very limited market in Japan. Japan has a well-organized waste collection system. Wastes easy material recycle are recycled material by material already for decades of time. Other waste is basically used for power generation.

Biodegradable resins can be an attractive option for countries where landfilling remains a major waste management way. I hear that China and India are part of such countries. Our colleagues there are developing a market for biodegradable.

Recycling is an essential option for countries with limited capacity for landfilling, such as Japan or Europe. Japan historically depends on power generation and simple incineration to reduce the volume of waste hard to recycle. Europe introduced a new directive to oblige to recycle plastic resins.  Both regions have big potential in the recycling of plastic resins.

About M&A, etc., we examine if such investment is essential in doing business effectively as Sojitz Pla-Net Corporation and judge whether we do it or not.

 

Earlier, you mentioned creating green products with Japanese manufacturers and your collaboration with Asahi in collecting PET bottles for recycling purposes. Are you also considering working with overseas firms to leverage their unique technologies?

We don’t have a plan to go overseas market with this Cap-to-Cap recycling business. We have already made investments worldwide, engaging in more than 10 projects since the '90s. However, in terms of recycling technology, it is still in the developmental phase. Our immediate focus is on completing this technology in Japan, where it is relatively new. Once we achieve this goal, we can then consider expanding our efforts overseas.

One critical aspect, particularly in the recycling market, is the collection of materials. Material collection typically involves waste collection, and the methods vary from one country to another. Whether it is waste sourced from individuals or businesses, the collection process differs significantly based on the specific practices and systems in each country.

As part of our strategic initiatives, we established a division called “Environment Sustainable Business Office" specializing in environmentally sustainable practices in October 2019, directly under the president's supervision. This division is dedicated to advancing our efforts in recycling and renewable energy, encapsulated by the two "Rs" – recycle and renewable. Our focus is on exploring innovative solutions using biomass and biodegradable materials. Additionally, we are actively engaged in recycling endeavors, evident in our collaboration with Asahi. Over the past four years, we have accumulated significant knowledge and established partnerships with universities and Japanese Ministries. We have also conducted educational seminars to raise awareness. Our emphasis is on nurturing and expanding this division, planting the seeds for its future growth and development as a core aspect of our business.

 

The resins that you distribute find applications in various fields, including automotive, electrical machinery, electronics, home appliances, and medical packaging. Which application do you believe holds the most potential for growth, or which one is your primary focus? Additionally, are there any new applications you plan to introduce your services to?

We focus on environmentally sustainable businesses.

Sojitz Pla-Net Corporation focuses on 3 areas in specific.

The first area concerns the distribution and development of eco-friendly resins. In April 2023, Braskem successfully completed the debottlenecking process at their Brazilian plant, resulting in a production capacity increase from 200,000 tons per year to 260,000 tons per year. Additionally, Braskem has announced plans to establish a new plant in Thailand in collaboration with SCG Group Thailand, boasting a production capacity of 200,000 tons per year. The expected commencement of operations is slated for late 2026. As a result, we no longer have concerns about potential supply shortages.

The second one is offering products that contribute to less food waste in society. We historically dedicated distribution of oxygen barrier materials which are widely adopted for food packages with longer shelf life, such as EVOH resin, BOPA or Biaxially Oriented Polyamide Film, and others.

Finally, the third one is the contribution to manufacturing new energy vehicles. We are supporting the development of weight reduction of electric vehicles, developing advanced materials for 5G/6G telecommunication technology, and the arrangement of EMS services for automotive Tier-1 suppliers, and so on.

 

As your company approaches its 20-year anniversary next year, looking six years ahead, what dreams do you envision for the company, and what specific goals would you like to have accomplished by then? 

Since joining Sojitz Pla-Net, I have formulated a new vision and corporate philosophy for our company, focusing on becoming a specialized trading company in synthetic resin. We are committed to leveraging our expertise in plastic products to create new business opportunities that contribute to building a more prosperous society where everyone feels safe and secure. In five years, our goal is to proudly claim that we have played a role in shaping such a society through the expansion of our trade and business ventures.

Upon joining Sojitz Pla-Net, I introduced a new vision and corporate statement, aiming to establish our identity as a specialized trading company in synthetic resin. We are leveraging our expertise in plastic products to create a novel business field that contributes to the development of a more prosperous society, ensuring safety and security for everyone. In the next five years, our goal is to realize this vision by expanding our trade and business activities.

An illustrative project of our commitment is the "Cap to Cap" initiative. Although it may seem insignificant, it demands significant time and effort. Similarly, our environmental business may take a while before it becomes profitable, but we are steadfast in pursuing our vision and philosophy.

The initial five years of our partnership with Braskem in the green polyethylene venture were challenging, but we view it as our responsibility to contribute to society while also ensuring the company's profitability.

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