Company history

The company began inside someone else’s laboratory. Osame Gohei, known for contact-process sulfuric acid plants, ran a firm making the sulfuric acid catalysts Japan then imported; the head of its research arm, Hachiya Taizo, worked on vanadium catalysts from 1937 and, alongside acid-proof cement, began studying phthalic anhydride — a paint and plasticizer feedstock Japan bought from abroad. Industrializing catalytic chemistry on domestic technology, rather than licensing it, meant living permanently next to the risk of an explosion. Hachiya found a route to phthalic anhydride by air oxidation of naphthalene, and in August 1941 the work was spun out as its own company with capital of ¥180,000.

In 1943 the firm bought land at Suita and started building a plant for 100 tonnes a month. In March 1944, barely on stream, it blew up — equipment scattered, workers killed. Hachiya argued for rebuilding rather than retreat. Air raids destroyed the Osaka head office in 1945 and the company moved to Suita; when Osame stepped down in 1949 Hachiya took the presidency and renamed it Nippon Shokubai Kagaku Kogyo. Through the 1950s Mitsui Chemicals, Daicel and Asahi Kasei each entered phthalic anhydride and each withdrew, defeated by the same explosion risk. Having had its accident first — and having built up the process discipline that followed, charge control, reactor cooling, relief valves — Nippon Shokubai held roughly 70% of the domestic market by around 1960. Danger, once survived, had become a moat.

It nearly failed anyway. In 1952 a recession shrank the PVC market and a company drawing 90% of sales from a single product fell to a half-year net loss larger than its capital, with bank credit closed to it. Hachiya went directly to Nagano Shigeo, president of Fuji Iron & Steel — the supplier of its naphthalene feedstock and also its largest shareholder — and secured a third-party allotment paid in naphthalene in kind, reversing a proposal Fuji’s own management had already rejected. A customer-shareholder relationship, not a bank, kept the company alive. Monthly phthalic anhydride capacity went from 30 tonnes in 1949 to 250 in 1951; polyester resin followed in 1953; the 1952 listing opened the capital market. Hachiya, who held that “a company is a public instrument,” refused family control and welcomed outside shareholders — the same conviction that had made the Fuji rescue possible.

In June 1959 Hachiya committed $2.7M (¥980m) — more than twice the company’s capital of $1.3M (¥480m) — to join Nippon Petrochemicals’ Kawasaki complex and build an ethylene oxide plant. The reasoning was structural: the only way out of dependence on a single product was to own petrochemical feedstock outright. The industry expected him to fail. Instead Himeji opened in 1960 and a second Kawasaki plant in 1967, giving the company two poles — Himeji built on phthalic anhydride and ethylene oxide derivatives, Kawasaki on ethylene oxide and its downstream — that could supply each other. At exactly the moment Japanese chemistry was shifting from coal to oil, a small firm had planted itself on the oil side.

The other half of the strategy was refusing to import technology. In 1951 Nippon Shokubai had been the first in the world to industrialize phthalic anhydride from a petrochemical feedstock, and in 1970 it domesticated acrylic acid by applying the vanadium catalysts and vapour-phase oxidation it had spent two decades refining. Most Japanese producers licensed acrylic acid from abroad; Nippon Shokubai grew its own oxidation catalysts instead. Acrylic acid mattered then for paints and inks. What it would matter for — as the raw material of superabsorbent polymer — was still fifteen years away, and the decision to make it in-house is what would later leave the company the only Japanese producer integrated all the way from acrylic acid to the finished polymer.

Research laboratories opened at Himeji and Kawasaki in March 1981. By then the centre of gravity had moved: phthalic anhydride was no longer the business, and the strategy had settled into its final form — one common technical base, catalysis, extended into an ever-wider product line.

Nippon Shokubai began trialling superabsorbent polymer (SAP) at Himeji in 1983 and moved to volume production in 1985 — seven years behind Sanyo Chemical Industries. Within a single year it was Japan’s largest producer: 20,000 tonnes against Sanyo’s 15,000 by fiscal 1986. Two things did it. Nippon Shokubai made its own acrylic acid and Sanyo bought it, so the leader could absorb neither price swings nor supply limits internally; and Nippon Shokubai’s customer was Procter & Gamble, the largest diaper maker in the world. “Back the winning horse and sales inevitably follow,” a company director put it (日経産業新聞, 31 October 1995). The survivor’s structure built in phthalic anhydride had reproduced itself in a completely different market.

That customer then pulled the company around the world. A US subsidiary followed in 1988, an Indonesian plant in 1996 as the Southeast Asian hub, Singapore in 1998 and Belgium in 1999 — a three-region supply network laid out along P&G’s own expansion, with SAP exports rising to roughly 80% of sales. The 1991 rename to Nippon Shokubai Co., Ltd. signalled ambitions beyond chemicals proper. In 2002 the company swapped businesses with Sumitomo Chemical, handing over methyl methacrylate for acrylic acid; Singaporean acrylic acid producers were acquired in 2004, Nippon Nyukazai and Taiwan’s Sino-Japan Chemical consolidated in 2008.

A long-range plan in 2001 named acrylic acid and SAP the core and committed to aggressive investment to meet P&G’s volumes, while unsaturated polyester and other resins were marked for restructuring. Concentration on the core and overseas expansion were, in effect, the same act — and both deepened the dependence on one buyer. The other cost of concentration appeared on 29 September 2012, when an acrylic acid tank at Himeji exploded, killing a firefighter and injuring dozens.

In 2015 the Belgian subsidiary NSE committed $376M (¥46bn) to new SAP and acrylic acid plants in Europe. It was the logic of the previous thirty years applied once more — own the feedstock, follow the customer — and it broke. P&G pressed prices down, SAP profitability fell, and NSE went chronically loss-making. A four-year “Survival PJ” launched in 2017 threw ¥90bn of capital spending, ¥60bn of strategic investment and ¥57bn of R&D at restoring SAP earnings and creating new businesses. The integrated chain that had been the company’s single greatest advantage was inseparable from the fact that the bulk of its SAP exports rested on one customer; the European build only tightened that knot.

In 2019 Nippon Shokubai announced a merger of equals with Sanyo Chemical — the very rival it had overtaken in 1986 — and abandoned it the same year as earnings moved during the preparation period. The reckoning came in the year to March 2021: a net loss of $98.4M (¥11bn), driven by $108.4M (¥12bn) of impairment on NSE’s plant and ¥9.2bn more on SIRRUS Inc., the US venture bought in 2017. The European expansion and the diversification-by-acquisition failed at the same moment.

The 2025 medium-term plan draws the conclusion. Capital earned by integration is being redirected away from SAP capacity toward shareholders and non-materials investment: cross-shareholdings cut by half of book value over four years, roughly $133.6M (¥20bn) of proceeds into buybacks, a payout ratio of 100% or DOE of 2% or more, and investment capacity steered to lithium-ion battery electrolytes and drug discovery. Eighty years after choosing to rebuild a plant that had killed its own workers, the company that made a virtue of owning everything upstream is deciding how much of that to keep owning.