Contraction drives more Japan LPG sector consolidation
Further consolidation is likely as Japan's LPG demand continues to fall and the country's decarbonisation drive ramps up, writes Reina Maeda
Japan's Itochu Enex has become the latest LPG distributor in the country to consolidate its operations as a result of the long-term contraction of domestic demand, driven largely by energy efficiency gains and a shrinking rural population.
Itochu Enex established a new subsidiary Itochu Enex Homelife in July to replace the company's four regional subsidiaries in Hokkaido, Tohoku, west Japan and Shikoku. The company says maintaining a nationwide sales network has been a major challenge in the face of what it expects to be a continuing decline in domestic demand. The four regional divisions will be dissolved after the new subsidiary is set up by 1 October.
This comes after fellow distributor Astomos founded a joint venture in southeastern Fukuoka prefecture in June alongside local supplier Masuda Sekiyu. The new firm, Masuda Gas and Retailing, will supply around 10,000 t/yr to 35,500 homes in Fukuoka as well as Nagasaki, Kagoshima and Kumamoto prefectures. Astomos holds a 49pc share and Masuda Sekiyu 51pc. Astomos and its peer Japan Gas Energy (JGE) also established a joint venture named e-partner Toyamain central Toyama prefecture in April, alongside two smaller local suppliers. The new company delivers LPG to around 30,000 households. The two local suppliers each own 35pc of the firm, Astomos has 20pc and JGE 10pc.
Astomos in January chose to not renew its contract to use one of Japan's largest import terminals in Tokuyama in southwestern Yamaguchi prefecture, saying that operating the facility had become uneconomical. The terminal is owned by refiner Idemitsu, which has not said what it plans for the terminal. Astomos will use a coastal facility near the terminal that can store 4,000t of LPG, supplied by coastal vessels from other import terminals in Shikoku and Chugoku.
Further consolidation of the sector is likely as Japan's LPG demand continues to decline over the coming years. This could accelerate based on the energy, trade and industry ministry's recently announced plans to decarbonise the sector. This includes shifting consumption to around 1.4mn t/yr of "green LPG" — renewable LPG, bioLPG and renewable DME — by 2035as well as reducing usage through energy efficiency improvements, cutting demand to about 11.9mn t/yr from closer to 14mn t/yr today.
The country's LPG consumption dropped by 1pc from a year ago and by 15.4pc on the month to around 981,000t in May, the latest data from the Japan LPG Association (JLPGA) show. Sales to all sectors except the city gas sector dropped compared with a year earlier. Household/commercial sector deliveries dropped by 3.5pc to 514,600t in May, while demand from the industry and autogas sectors fell by 7.3pc to 176,600t and by 7.5pc to 27,200t, respectively. LPG sales to the petrochemical sector also fell, by 5.2pc to 145,200t in May. But demand from the city gas sector continued to grow, rising by 39pc to 117,500t, the JLPGA data show, as more is used as an additive while LNG prices are high.
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