JAPANESE PP GIANT EYES N. AMERICAN MARKET

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Grand Polymer Co. Ltd., one of Japan's largest polypropylene producers, tentatively plans to follow the lead of Japanese automakers by expanding into North America later this year.

The Tokyo company is a joint venture between Ube Industries Ltd. and Mitsui Petrochemical Industries Ltd., both also of Tokyo. The resin maker is in the midst of a capacity expansion in Japan that will push its total PP capacity to about 1.54 billion pounds annually.

The company is considered by industry experts to be the second-largest PP supplier in Japan, which is a massive market for the resin.

All the company's resin currently is being used in Japan and other parts of Southeast Asia, primarily by Japanese automakers. Grand Polymer is the largest PP supplier to Toyota Motor Corp. and the second-largest supplier to both Nissan Motor Co. Ltd. and Honda Motor Co. Ltd., said Grand Polymer planning director Masato Yoshida.

In North America, however, the company has no presence. But two PP compounders associated with Grand's parent companies are based in the United States — Applied Technological Composite Inc., partly owned by Ube and based in Nashville, Tenn.; and Color & Composite Technologies Inc. in Sidney, Ohio, which is owned by Mitsui Toatsu Chemicals Inc. of Tokyo. Mitsui Toatsu will merge with Mitsui Petrochemical in October, Yoshida said.

Grand is considering acquiring the shares of both compounding companies as a way to pry open the door to the West, Yoshida said. Together, the two compounding companies supply a total of 110 million pounds per year, he added.

Production from the two compounding facilities is just a start in supplying the North American market, Yoshida said. The company is considering starting new resin production plants or buying existing facilities on this continent, Yoshida said. Grand hopes to have its plans in place within six months, he added.

``We'd like to invest in expanding our capacity in North America, if the resources are available,'' Yoshida said. ``At this time, it's too early to say something definite. But we hope [the expansion] will materialize this year so we can work with our customers in North America.''

Although Grand Polymers was formed in October 1995, the company has become an industry giant. Together, Grand Polymers and the resin division of the Mitsubishi industrial group of Tokyo, supply about half the PP market in Japan, Yoshida said.

The resin manufacturer was formed when Ube and Mitsui Petrochemical both invested 2.5 billion yen ($21.5 million) to create the 50-50 venture.

A third partner will be added in July when Mitsui Toatsu invests another 2.5 billion yen in the company. Toatsu has announced plans to merge with Mitsui Petrochemical in October, giving Mitsui Petrochemical a two-thirds share in Grand Polymer.

The company is embarking on a major capacity expansion that will boost its PP production from about 1 billion pounds, to more than 1.5 billion pounds by summer's end. The new capacity partly comes from the Toatsu merger, which will add about 77 million pounds.

Grand is picking up another 196 million pounds from Senboku Polymer Co. of Tokyo. The company will be disbanded, Yoshida said. In addition, the company plans to debottleneck plants in Chiba and Osaka, Japan.

Grand's volume also includes the PP business of Tokyo-based Sumitomo Chemical Ltd., which was combined with Mitsui Petrochemical's PP production in 1995.

The capacity surge was needed to keep pace with the volume required by Japanese automakers, Yoshida said. Prior to the expansion, some PP had to be purchased by Grand from outside vendors, he said.

With the Toatsu merger, Grand will operate eight plants in Japan, including two in Chiba, five in Osaka and one in Yamaguchi, Yoshida said. The resin supplier also has a joint venture in Thailand with Grand Siam Composites Ltd. of Bangkok to produce PP compounds.

If the company ventures into North America, it could open the floodgates for other Japanese resin suppliers, said automotive plastics consultant Robert Eller of Robert Eller Associates Inc. in Akron, Ohio. The PP market on this continent continues to grow, especially in the automotive industry, Eller said.

``The auto industry here represents good growth potential for Grand Polymer,'' said Eller, whose company plans to release a study this fall on the use of PP compared to other materials on automotive interiors. ``They have technology that looks promising for the industry. Other Japanese resin producers could also be right behind them.''

Eller estimates the North American automotive market used about 800 million pounds of PP during 1996, about 40 percent of that from pure resin and the rest coming from compounds. Among its uses are skins and substrates for door trim and instrument panels and housings for vehicle batteries, and applications that generated 70 million pounds of PP last year.

Sales figures for Grand Polymer were unavailable.