JX Holdings and TonenGeneral Sekiyu KK announced Thursday that they will merge as a way of coping with Japans declining demand for fuel and oil products.
The companies said some refineries and other facilities will be shut down but that the new corporation, scheduled to be formed by April 2017, will continue to use both companies brands.
JX Holdings and TonenGeneral intend to continue using each brand that is currently being used in their respective energy businesses after the integration and will discuss and determine the most appropriate brand strategy for the integrated energy business going forward, the companies said in separate statements.
JX Holdings is Japans leading lubricant and base oil supplier, claiming approximately 32 percent of the finished lube market and operating three base oil plants. It manufactures and markets automotive and industrial lubricants under the Eneos brand. TonenGeneral has approximately 8 percent of the finished lube market and operates a single base oil plant. It also produces and markets Mobil automotive and industrial lubricants under license from U.S.-based ExxonMobil.
According to the statements by the two companies, the merged company will develop into one of the most prominent and internationally-competitive comprehensive energy, natural resource and materials company groups in Asia. They aim to improve annual profits on a consolidated basis by more than 100 billion (approximately U.S. $800 million) within five years.
To achieve this, the companies will look into the disposition and integration of refineries… and streamlining of the organization through integration and elimination of redundancies, said the statements.
Both companies acknowledged the necessity of concentrating the business resources of the JX Holdings and the TonenGeneral group in order to maximize their enterprise value in an environment in which demand for oil in Japan is decreasing.
The Society of Automotive Engineers of Japan stated in its Year Book 2014, A downward trend in the demand for fuel oil has continued since 2009. It went on to add, Global warming countermeasures and other contributing factors like the tremendous increase in the number of fuel-efficient vehicles, including mini-vehicles, that were introduced into the market [contributed to the slowdown].
JX Holdings and TonenGeneral are not the only Japanese refiners trying tie-ups as a way to battle the countrys shrinking market for oil and oil products. Major lubricant players, Idemitsu Kosan and Showa Shell Sekiyu signed a non-binding Memorandum of Understanding for Business Integration last month, to integrate and rationalize assets and to pursue collaborations.
TonenGeneral produces both base oil and lubricants at its Wakayama Refinery. Its lube oil blending plant gets base oil feedstock from its Wakayama Refinery for lubricant production.
According to the company website, its base oils are mainly exported to Asia through ExxonMobil's distribution channels. It also has a lube blending plant in Tsurumi, located in the northeastern part of Yokohama, part of the Greater Tokyo Metropolitan area, which is Japan's largest lubricant consumer market.
Japans largest lubricant supplier, JX Nippon Oil & Energy Corp., said it will change its Japanese corporate name to JX Energy Corporation on January 1, 2016.