Mitsubishi Chemical Corp., Showa Denko K.K., Tonen Chemical Corp. and Nippon Petrochemicals Co. plan to merge their polyethylene business, company sources said Friday.

The alliance of the four firms will give them the biggest polyethylene production capacity in Asia.

The plan is aimed at countering the move by Sumitomo Chemical Co. and Mitsui Chemicals Inc., Japan's second- and third-largest chemical companies, to merge their polyethylene operations in October.

Sumitomo and Mitsui have also agreed to integrate their overall business by October 2003.

With European and U.S. chemical companies building large-scale production facilities in Asia, Japanese chemical firms are faced with the urgent task of realigning themselves and cutting costs.

They also need to increase their competitiveness to cope with the planned reduction of import tariffs on petrochemical resin products in 2004.

Mitsubishi Chemical said in a statement: "The company and Japan Polychem are considering every possibility, including (an alliance with) Japan Polyolefins, to strengthen international competitiveness in the polyethylene business. At present, however, nothing has been decided." Show Denko issued a similar statement.

Tonen Chemical is a subsidiary of TonenGeneral Sekiyu K.K., while Nippon Petrochemicals is a subsidiary of Nippon Mitsubishi Oil Corp.

Under the plan, the polyethylene business of Japan Polychem Corp. -- a joint venture between Mitsubishi Chemical and Tonen Chemical -- will be integrated with Japan Polyolefins Co., a joint venture between Showa Denko and Nippon Petrochemicals.

By around the beginning of 2002, Mitsubishi Chemical, Showa Denko, Tonen Chemical and Nippon Petrochemicals plan to jointly set up a new company to integrate their operations, with Mitsubishi Chemical as the biggest stockholder.

In anticipation of stronger competition, the Sumitomo-Mitsui alliance plans to build polyethylene facilities with an annual production capacity of 1 million tons in Singapore.