JX Holdings and TonenGeneral Sekiyu KK said yesterday that they are discussing possible forms of cooperation as they seek to remain competitive in Japans shrinking oil products markets.
Their disclosures were included in separate statements denying news reports that they aim to reach a merger agreement by the end of 2015.
There is nothing concrete, and the timeline of a management integration within the year is only a report by the media, a JX Holdings spokesman told Lube Report Asia.
JX is Japans largest lubricant supplier, claiming 32 percent of domestic sales in 2012, while TonenGeneral held 8 percent. JX is also the nations largest base oil producer, operating three wholly owned plants and holding stakes in several others. TonenGeneral produces base oils at a refinery in Wakayama.
The base oil industry in Japan has contracted for the past two years. According to the Ministry of Economy, Trade and Industry, production of base oil for 2013 was 2.21 million metric tons but shrunk to 2.18 million tons in 2014. Domestic consumption for 2013 was 1.38 million tons and fell to 1.37 million tons in 2014. Exports slowed as well, from 807,000 tons in 2013 to 759,000 tons in 2014.
To cope with shrinking domestic demand for fuel, base oil and lubricants, oil companies in Japan are trying to rationalize and improve efficiency by reorganizing and expanding overseas. Idemitsu Kosan and Showa Shell Sekiyu also produce base oils and are discussing a comprehensive management integration after Idemitsu Kosan announced in August this year its purchase of a 33.2 percent share of Showa Shell Sekiyu.
The financial newspaper Nikkei and other news organizations reported yesterday that the companies are negotiating a deal to integrate management and intended to reach an agreement before the close of this year.
However, the statements released by the companies suggest that they are considering a broader range of options and that a decision is not so imminent. To increase our competitiveness, we are looking into various options, and at this point in time we have not decided on anything, JX said.
TonenGeneral acknowledged that it is considering cooperation – apparently with more than one other company. We are looking into various management options, including a tie-up with other companies, but at this stage there is nothing concrete, and nothing is decided, it advised.