Mar. 30, 2010
Mitsui & Co., Ltd. and Sumitomo Corporation have agreed to establish a business alliance in the area of fertilizer raw material importing. The two companies signed an agreement to this effect yesterday.
Under the new business alliance, the two companies will work to improve the efficiency of their fertilizer raw material importing operations through various measures, including the joint allocation of vessels and cooperation on domestic logistics. In the future, they will work to secure access to more competitively priced fertilizer raw materials, while at the same time strengthening their ability to sell to fertilizer manufacturers and wholesalers in Japan.
The main raw materials for fertilizers are nitrogen, phosphate and potassium. These materials are mostly derived from natural resources, which are scattered in various major producer regions. World demand for fertilizers is expected to expand in the medium- to long-term future because of population growth, and international prices for fertilizer raw materials are also likely to rise gradually.
However, fertilizer demand in Japan is tending to shrink because of the reduction of areas under cultivation. Reasons for this situation include stagnating prices for agricultural products, and a lack of successors for retiring farmers. The capacity to absorb anticipated rises in the prices of fertilizer raw materials is therefore limited. Thus customers in the Japanese fertilizer industry will hope for reliable access to fertilizer raw materials at competitive prices and will call on general trading companies to strengthen their core competence in this area.
Mitsui & Co. and Sumitomo Corp. have therefore agreed to establish a cooperative relationship that will allow them to respond promptly to market needs by combining their purchasing power and expertise. The two companies also see this business alliance as a way to contribute to the stabilization of the Japanese fertilizer industry.
Having established this business alliance, the two companies will now explore the potential for cooperation in their investment and lending activities relating to the fertilizer business in Japan and overseas. They plan to establish a liaison group in preparation for future discussions.