Japan Idemitsu Kosan Co. plans to sell wholly owned subsidiary Shell Lubricants Japan back to Shell as it looks for more overseas opportunities amid a shrinking domestic market, the company announced last week.
“We find it difficult to continuously manage the lubricant business for different brands which are competing, to find synergy and others,” an Idemitsu Kosan spokesperson told Lube Report. “As a result, we are in negotiations for the sale of the [lubricant] business. As mentioned in our medium-term management plan, we aim to develop our lubricant business overseas and in new markets, by developing products like electric vehicle fluids and innovative grease and others.”
Idemitsu Kosan issued a press release stating that the companies will begin discussions for Shell to acquire all shares of Shell Lubricants Japan (SLJ) K.K. along with rights for the use of SLJ’s Shell-branded lubricants business. Shell, however, refused to confirm the subject of those talks.
“We can confirm that we are in talks with Idemitsu regarding a potential investment that relates to the lubricants business in Japan. The details of the conversations are confidential. A formal announcement will be made should an agreement be reached,” a Shell spokesperson told Lube Report.
When asked if an agreement will be reached within the year, an Idemitsu spokesperson said they plan to finalize negotiations as soon as possible.
“Idemitsu’s lubricants division is closely tied to Japanese automotive and machine tools manufacturers with their own Apollo brands, as well as expanding in many Asian countries – recently Vietnam, Indonesia and India – and therefore is competitors with Shell outside of Japan,” said Glenn Perkins, an independent lubricants consultant based in Japan. “This did lead to a frayed relationship between Idemitsu and Shell globally.”
“Year on year, the Japanese lubricant volumes are decreasing as more manufacturing is going offshore, fewer cars and machining is being sold in Japan to an aging population, and due to [electric vehicle] production. There are too many lubricant competitors here in Japan, in an ever-decreasing market. This is the same as the number of gas stations. I see many of them closing up. Hence the sale of the lubricants division back to Shell in Japan,” he added.
Idemitsu has also been expanding its range of industrial lubricants, especially in metalworking fluids and grease technology and “felt that the Shell Industrial lubricants lineup was incomplete and too much of a commodity product for them. It wasn’t attractive since Royal Dutch Shell had sold off their metalworking fluids products to Houghton,” he added. He also said Shell stopped investing in research and development of industrial lubes such as slideways lubricants, hydraulics fluids and general gear oils, and subsequently lost market share for those products.
Idemitsu Kosan and Showa Shell merged in April last year and became the second-largest lubricant supplier in Japan. The new company is called Idemitsu Kosan Co., but business is being conducted under the trade name Idemitsu Showa Shell. Lubricants sales volume for the third quarter last year was 1.3 million kiloliters, not including Shell lubricants.