Facing up to Japans shrinking lube market, Cosmo Oil Co. announced last week a supply agreement to have its lubricants manufactured by TonenGenerals EMG Marketing Godo Kaisha. The new arrangement takes effect in November 2015, and Cosmo intends to close its blending plant in Chiba, Japan, the following month.
Lubricant demand in Japan has been declining, and Cosmo officials said they expect that trend to continue for the foreseeable future.
Although economic recovery has slowed the downturn in domestic demand for lubricants, the downward trend is likely to continue in the medium term, necessitating measures to ensure greater competitiveness, the Tokyo-based company said in a recent statement.
Cosmo Oil and subsidiary Cosmo Oil Lubricants Co. signed a contract Aug. 5 to have its lubes manufactured at EMG Marketings blending plant in Tsurumi, in eastern Japan. Under terms of the agreement, EMG Marketing is this month undertaking a plant expansion scheduled to wrap up by August of next year.
The Chiba plant, operated by Cosmo Oil Lubricants, occupies 61,000 square meters and has capacity to make 40,000 kiloliters per year. The 138,000 square meter EMG Marketing plant has capacity of 110,000 kl/y. The companies did not disclose the size or cost of its expansion.
For Cosmo Oil, the deal is part of a broader plan to improve its overall financial status.
Regaining profitability is our foremost priority through to fiscal 2017. Our goal is to lift ordinary income (excluding inventory valuation impact) by 78.9 billion from 33.1 billion in fiscal 2012 to 112 billion over the next five years, Cosmo Oil President Keizo Morikawa said in the companys 2014 annual report.
TonenGeneral Sekiyu K.K. is jointly owned by ExxonMobil, Mitsui & Co., banks and investment funds. EMG Marketing produces and markets lubes under ExxonMobils Esso and Mobil brands.