Petrochemicals &Plastics Sector

Ⅱ Noriaki Takeshita

Representative Director &Senior Managing Executive Officer

1

ⅡPetrochemicals & Plastics Sector

1

Overview of03
the Petrochemicals & Plastics Sector

2

Enhancing Profitability

103

Social & Environmental Efforts

134

Prospective Business182

ⅡPetrochemicals & Plastics Sector

1

Overview of03
the Petrochemicals & Plastics Sector

2

Enhancing Profitability

103

Social & Environmental Efforts

134

Prospective Business183

Ⅱ-1 Major Products
Polyethylene (PE)Resin used as a packaging material,a major product of the petrochemical industry【Our features】
・Strengths in high quality protective films
・3 production bases in Japan/Singapore/Saudi Arabia

Polypropylene (PP)
Widely used resins for automobile parts andpackaging materials, etc.
【Our features】
・Global operation of PP compounds for automobiles
・Strong in high-performance packaging applications

MMA (MMA-m/PMMA)

Propylene Oxide (PO)【Our features】
・2nd largest market share in Asia, 4th in the world (MMA-ｍ)【Our features】
・Proprietary technology that does not produce co-products
・Promoting licensing of the proprietary technology

Resins with high transparency andexcellent weather resistance, and their raw materials

IR Day: Petrochemicals & Plastics

Raw material for urethane used in automobile seats andfurniture4Ⅱ-1 Petrochemicals & Plastics Sector by Region
LocationJapan

Positioning

・Development base for new
products & technologies

Challenge・Response to aging equipment
・Strengthening licensing business

Capacity(KTA)
LDPE
LLDPE
HDPE
PP
PO
MMA-m
PMMA

Location
Location

Saudi Arabia

Japan

Singapore

172
183

255

307
200
90670

Saudi
Arabia

223
150

150
600
300
700
200
9050

Singapore

Major
affiliates

・Petrochemical corporation ofSingapore
・The polyolefin company
・Sumitomo chemicals Asia

Major
affiliates

・Petro Rabigh (PRC)

Positioning

・Refinery-Chemicals integration
complex, taking advantage of low-costfeedstocks and fuels

Positioning

・Petrochemical business hub withstrong customer base・Unstable profit and loss trends due tofluctuations in oil refining margin

Challenge

・Continue to add value to products
・Maintaining high share for leading
customers

Challenge

IR Day: Petrochemicals & Plastics5Ⅱ-1 Petrochemical Market Conditions
Margins for petrochemical products peaked around 2016 and had
been on a downward trend, but improved in 2020 despite COVID-19.
(USD/MT)

Margin trends – Polyolefin

900800700
600
500400300200
1000

LDPE-1.3*Nap

PP-1.3*Nap

NaphthaSource: Sumitomo Chemical calculated from IHS Markit

IR Day: Petrochemicals & Plastics

6Performance Trends forⅡ-1
the Petrochemicals & Plastics Sector(Bil. JPY)

150
100
500(50)2015

2016
Singapore

2017
Petro Rabigh

2018
Others

2019
Total

2020
forecast※ 2015, 2016: Operating Income + Equity in earnings (losses) of affiliates2020 forecast: Petro Rabigh’s figure shows Jan.-Sep. Actual• The profit level of the Petrochemical & Plastics sector is affectedheavily by petrochemical product market conditions.
• The profit and loss forecast for FY2020 is a large deficit,
despite relatively favorable product market conditions,due to the deterioration of Petro Rabigh’s business performance.
IR Day: Petrochemicals & Plastics7

Ⅱ-1 Petro Rabigh’s Performance
FY2020
Income before tax(unit; USMM)

Jan.-Mar.

Apr.-Jun.

Jul.-Sep.

-547

-304

-168

Major causes for deterioration
Scheduled
Maintenance

Crude oil price plunge

Margin reduction
due to COVID-19

All these events hit during the scheduled maintenance period in Mar.-Apr.
- unprecedented and extremely special situation

Future outlook
 FY2020: Scheduled maintenance completed.
Product margins recovering, deficit shrinking
 FY2021: Impact from special events will diminish.
Improving profit & loss by continuing stable operations
IR Day: Petrochemicals & Plastics8

Ⅱ-1 Rabigh Phase Ⅱ Project –Resolved completion guarantee in Sep. 2020

Progress of the Phase Ⅱ Project
March 2018

All products compliedwith specifications

October 2019
Completed CRT*1

End of 2017

November 2019

September 2020

Started commercialoperations

Resolved completionguarantee

Test run

2017

Maintaining stable operations at
both PRC Phase Ⅰ and PRC Phase Ⅱ

Construction completed

2012
Confirmed business feasibility
with a feasibility study*1 Creditors Reliability Test

Investment and Completion Guarantee
Total investment
in PRC:Approx. US＄

9.1bn.

Cash flow
before completion

0.9bn.

Approx. US＄

Project financing
Approx. US$

5.2bn.

Loan guarantees byparent companies
Approx. US$

3.0bn.

Completion guarantee(amount borne by Sumitomo Chemical)
Resolved in Jun. to Sep. 2020
Debt guarantees(amount borne by Sumitomo Chemical)

Approx.
US$

2.3bn.*2

Approx.
US$*2

1.5bn.

To continue until capital increase is executed＊2 As of Sep. 2020

IR Day: Petrochemicals & Plastics

9ⅡPetrochemicals & Plastics Sector

1Overview of03
the Petrochemicals & Plastics Sector

2Enhancing Profitability

103Social & Environmental Efforts

134

Prospective Business1810

Ⅱ-2 Licensing & Catalyst Business
Expansion of Technology Licensing BusinessPropylene Oxide Technology

Caprolactam Technology

Licensed to 4 Plants at 4 Companies(As of 2020)• Energy saving & environmental-friendly• World’s first co-product-free process

2020: Entry to Licensing Business• World’s first vapor-phase Beckman
rearrangement process• Ammonium sulfide free• High performance catalyst

HCl Oxidation Technology

Catalyst Manufacturing Plant

Licensed to 10 Plants at 6 Companies(As of 2020)• Recycling of by-products• Significant energy savings(Chiba Works)

Started-up

PE & PP Technology

PE・PPCat.

2019
3Q• Wide range of polymer grades and portfolio• High performance catalyst

POCat.

2019
4Q

Stable profit through technology licensing and catalyst sales
IR Day: Petrochemicals & Plastics

11Ⅱ-2 High Value-Added PolymersFlexible
Displays

5G materials
Mono-material film
Contribution tomaterials recycling

High performance
retort pouches
Reducing food loss,
reducing packaging
weightContribution toachieving
an IoT society

Commodity
polymers

Highly rigid andtough materials forautomobiles
Reduction of CO2
emissions by
reducing weight

New resin heatstorage material
Contribution toenergy saving

Microwaveable
retort pouches

Prototype PMMA rearwindow for cars
HEATORAGE®

IR Day: Petrochemicals & Plastics

12

Ⅱ

Petrochemicals & Plastics Sector

1

Overview of03
the Petrochemicals & Plastics Sector

2

Enhancing Profitability

103Social & Environmental Efforts

134Prospective Business1813

Ⅱ-3 COVID-19 Countermeasure Products
１) Product introduction
Transparent acrylic cast sheet: Sumipex
Transparent acrylic ext. sheet: Sumipex EFeatures: Excellent transparency,
scratch resistance,
weather resistance, suitable for long-term use.
Example uses: Store/reception counters, restaurants, hospitals, schools, etc.

２) Global supply chain

America, Europe
Asia, Africa etc.
Acrylic cast sheet (Thailand)
Sumipex Thailand
9,000 tons/year

IR Day: Petrochemicals & Plastics

Acrylic ext. sheets (Japan)
Escarbo sheet Co., Ltd.
5,000 tons/year

Domestic sales in Japan
Overall management atSumika Acryl Co., LtdAcrylic cast sheet (Taiwan)
Sumipex Techsheet
6,000 tons/year14Ⅱ-3 COVID-19 Countermeasure Products3) Expanding the functionality of acrylic sheets> Increased demand for antibacterial and antiviral materials due to COVID-19 situation> Providing solutions through technical collaboration with Sumika Environmental Science
Co., Ltd. (antiviral agent).
Antiviral
Expanded Functionality

Antiviral acrylic sheets

Targeting commercializationby 2021★
Medical/health applications(display covers, handrails,sideboards, etc.)

Antibacterial★
Scheduled to go on sale by

Antibacterial acrylic sheets
the end of 2020

Partition against
airborne droplets

General grade ofacrylic sheet

2020
IR Day: Petrochemicals & Plastics

2021
15

Ⅱ-3 Global Warming Initiatives ①
Promote fuel conversion to reduce CO2 emissions inmajor domestic production bases (Ehime & Chiba)
Build LNG terminal in Ehime through joint
investment by 5 firms
Introduce high-efficiency gas turbine
power generators
Replace some of the existing boilers
Composite image: LNG terminal at the Ehime works

Fuelconversion

Shift from coal, petroleum cokeand heavy oil to LNG

Thermalefficiency

Supply steam, using hightemperature exhaust gas fromgas turbines

Reduce CO2 emissions
Ehime: 650 thousand tons/ year
Chiba: 240 thousand tons/ year
IR Day: Petrochemicals & Plastics

CO2 Emission Factors for Fossil Fuels(tCO2/GJ)
0.10
0.08
0.06
0.04
0.02
0.00

Coal

Petro coke Heavy Oil

LNG

16

Ⅱ-3 Global Warming Initiatives ②
Propylene Oxide-only Method(Cumene Method)
Air
CumeneH2OH2CumylAlcohole

CumeneHydroperoxide
PropylenePO

Co-product free,energy saving andstable operation

Cl2

Elec.

Relative energy consumption
against POCl (=100)

5758

HPPO

PO/SM10033

POC(Sumitomo) (incl.H2O2)

POCl(incl. Cl2)

Sumitomo
HCl Oxidation

NaCl
Electrolysis

Electricity[kWh/t-Cl2]

165

2,500

CO2 Emissions*1
[t/t]

0.08

1.3

Isocyanate
HClUrethane

HCl Oxidation

Steam

Comparison with typical alternative

HCl Oxidation Technology
Isocyanate Plant

Utility Consumption

Comparison with typical PO technologies

Recycling of by-products,
Significant energy savings*1 The value was calculated with CO2 emission factors
from the Japanese Ministry of the Environment

Contributing to reducing global warming by licensing energy-saving processes
IR Day: Petrochemicals & Plastics

17ⅡPetrochemicals & Plastics Sector

1Overview of03
the Petrochemicals & Plastics Sector

2Enhancing Profitability

103

Social & Environmental Efforts

13

4

Prospective Business1818

Ⅱ-4 Prospective business
Aiming at a Decarbonized Society, Circular Economy
Plastic products make our lives richer and more convenient,but there are issues with both the carbon footprint caused byconsuming petroleum as a raw material and with how to handle
and reuse waste plastic products.
Area

Direction of business

Addressing
ClimateChangeContribute to reducing GHG emissions

Reducing
Environmental
ImpactContribute to reducing waste plastics

Effective Use ofResources

Use biomass-derived raw materials

Contribute to reducing impact in foodproduction
Implement carbon resource recycling
Expedite carbon capture and utilization
technology

IR Day: Petrochemicals & Plastics

Direction of R&D
We strive to promote R&D in plastics productsthat contribute to the 3 Rs (Reduce, Reuse,Recycle), and to enhance their environmental
friendliness and utility value.

Lighter Packaging
Promotion of Reusable Products
Development of technology to utilize
waste plastics and captured carbon

19Ⅱ-4 Materials Recycling Technology Automotive materials
Environmental Contribution Results (FY2018)
Reduction of Virgin PP usage: 4,700 T/Y
GHG emission reduction: 12,300 T/YConsumption
DisposalMolding
Commercialization
through Sumika Polymer
Compounds Europe Ltd.
Glass fiber reinforced
PP compound (pellets)
Regenerated PP rate:
Over 60%

IR Day: Petrochemicals & Plastics

Collection

Initiatives ofthe SC Group

Conversion tonew products

Recycling

Advancedmanufacturing andquality control
technology, andabundant know-how

20Ⅱ-4 Chemical Recycling Technology
Garbage, biomass

Adhesives,Paint,
Chemicals etc.

Plastics(Polyolefins)

Waste plastics
Incineration

CO2, H23CO
H2Methanol

Decomposition
Gasification*

1Ethanol

Our
TechnicalCompetencies

2

1. Catalyst designtechnology
2. Chemical process
design technology

Olefins(Ethylene, Propylene etc.)*existing technology

Produce plastics from waste plastics or garbage instead of fossil resources① Alliance with SEKISUICHEMICAL
RM

Garbage, waste plastics,
biomass
Prod. Polyethylene
React. Gasification→ ethanol(by microbes) → PE

IR Day: Petrochemicals & Plastics② Joint research with
Muroran Inst. Tech.
RM
Waste plastics
Prod. Ethylene, propylene
React. Catalytic cracking③Joint research withShimane Univ.
RM

Garbage, waste plastics,biomass
Prod. Methanol
React. Catalytic synthesis of
CO2 and H221

Cautionary Statement
Statements made in this document with respect to Sumitomo Chemical’s current plans,estimates, strategies and beliefs that are not historical facts are forward-looking
statements about the future performance of Sumitomo Chemical. These statements
are based on management’s assumptions and beliefs in light of the information
currently available to it, and involve risks and uncertainties.
The important factors that could cause actual results to differ materially from those
discussed in the forward-looking statements include, but are not limited to, general
economic conditions in Sumitomo Chemical’s markets; demand for, and competitive
pricing pressure on, Sumitomo Chemical’s products in the marketplace; Sumitomo
Chemical’s ability to continue to win acceptance for its products in these highly
competitive markets; and movements of currency exchange rates.

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