While the demand for air-separated gases in Japan remains stable at a low level, gas sales efforts are shifting priorities from developing new customers to securing profitability from current customers.
Industrial gases are consumables, so traditionally once a company secures the right to supply a user, they are ensured that additional orders will arrive each month, resulting in a tendency to put off confirming the profitability of existing customers. Particularly in the days when demand for liquefied gases was constantly increasing, priority was set on finding new customers over following up on current customers, and it was just common sense for suppliers to fight to gain customers.
The times have changed. As Japan Industrial and Medical Gases Association (JIMGA) statistics clearly show, sales of air-separated gases in 2018 were down from peak quantities, liquefied oxygen to 70%, liquefied nitrogen to 85%, and argon to 95%. For liquefied oxygen, the main factors behind the decline are the integration of electric furnaces by major users along with a shift to gas through PSA. Behind the decline in liquefied nitrogen demand are long term stagnation caused by onsite supply of gases in electronics together with the absence of new major users and new applications.
Although the demand for liquefied gases has dropped a level or two over past demand, the last few years have fortunately shown indications of an end to the decline and stabilization of demand. That has resulted in suppliers’ confirmation work for current customers to ensure that sufficient profitability can be secured even at the current demand levels. Actually confirmations involve checking that the original estimates of profitability are still feasible and seeing if monthly sales quantities, supply prices, and other items have reached target levels, and then approaching customers concerning pricing and supply conditions if the targets are not being met.
Of all the costs incurred in gas business, there is a risk that distribution costs will continue to increase. As The Gas Review has reported many times before, Japan’s distribution industry is worried about the shortage of drivers caused by the lack of interest in driving by the younger generations and the aging of current drivers. Compared with packaged gas, there is currently less urgency about the driver shortage for tanker trucks with their relatively high added value, but the decline in the driver population will inevitably reach tanker trucks as well. In addition, there are several factors pushing up shipping costs, including higher personnel expenses due to current work-style reforms and increases in fuel costs. As a result, distribution costs, though they may increase further, are definitely not going down in the foreseeable future.
Therefore, efforts to make distribution more efficient are essential to the future continuation of bulk, liquefied gas business. Currently companies are starting to undertake many activities toward that end: rolling stock investments, such as GPS installation for current location detection and measurements via dead weight meters; visualization for distribution via hardware, such as larger storage tanks at customer locations and remote monitoring of liquid levels; inspection of residual liquid rates to measure filling loss such as boil-off and short shipments; operational means, such as monitoring and reducing total travel distances; and adjusting timing of customer presence for deliveries.