Japan’s Iwatani International Corporation has always had its customers at heart, a strategy that has seen the company stand the test of time and grow to become a major regional and international gas player. Helen Carmichael talks to the company’s Senior Executive Director, Takashi Miyagawa.
Iwatani International Corporation (Iwatani) began in 1930 when Naoji Iwatani launched his oxygen and welding supplies business. “In pre-war times, our company found considerable success as the largest industrial gas dealer or distributor in the Kansai area,” Miyagawa explains. “The liquid petroleum gas (LPG) business starting in 1953, however, triggered our company to make a great leap forward after the war.”
The company expanded its sales network based on the LPG supply for the consumer market, which resulted in a fuel revolution for Japanese consumers. This was extremely valuable to homemakers because the fuel supply freed up a considerable amount of time and effort, boosting the Iwatani’s popularity. “At the same time we tried to branch out into other businesses than industrial gas in order to expand our scale of operation,” Miyagawa says.
The 1960’s saw the company begin importing LPG from Canada to meet demand, and the company reorganised to take on new challenges in the areas of consumer products, housing and agricultural modernisation, gas development, anti-pollution measures, and labour-saving devices. Further restructuring followed, and in the late 1970’s Iwatani launched two major projects: construction of a large-scale liquid hydrogen plant and establishment of Cold Air Products Co. Ltd, a company which effectively uses the heat generated when converting LNG into gas. September 1978 saw the completion of Japan’s largest liquid hydrogen production plant in Osaka, with 730 litres per hour or 36 tonnes per month capacity and storage of 200,000 litres.
“Since then, our company has made efforts to streamline our industrial gas supply network by building ASU’s both at home and abroad,” Says Miyagawa. “In 2006, the combined plant for liquid hydrogen and air separation gases at Hydro Edge Co. Ltd. went into operation.”
Today Iwatani is the Japan’s largest LPG supplier and is active around the world. In addition to gas and energy, subsidiaries and affiliate interests include fuel, consumer products, industrial materials, construction, agriculture, and medical products.
According to Miyagawa, securing a stable supply of gases is the top priority in this business.
“All investments into industrial gas production plants and large-scale LPG bases we made in the 1970’s and 1980’s played very important roles in terms of strengthening our supply of gases and consolidating our position as a supplier of gases in the market place.” The company started operation of the largest liquid hydrogen plant in Japan in 2006. “This plant is the only one enabling full scale liquid hydrogen supply on a commercial basis, and gives us a clear advantage in hydrogen business in the Japanese market,” he adds.
Due to the steep appreciation of the Yen after the Plaza Accord in 1985, Japanese companies were driven to accelerate their plant relocation to other countries. “Our major industrial gas users positively implemented their plant relocation to China and Southeast Asian countries,” says Miyagawa. Iwatani followed its customers by strengthening overseas business development, centring on China and Southeast Asia as an industrial gases supplier to major manufacturing plants. “Today, we have two air separation plants and one CO2 plant in China, and two gas filling stations in Southeast Asia.”
Iwatani has expanded its global operational presence by establishing new companies and joint ventures rather than acquisitions, with Miyagawa reflecting, “We anticipated that the intention of management would be more easily reflected in these companies than acquisition.”
Unlike Europe and the US, it is only recently that M&A has become common in business expansion in Japan. However, in the LPG business, the company has undertaken M&A in a positive manner, reinforcing the downstream business and aiming to increase the number of customers, since 2003. “In the future, we will discuss strategies with a view to M&A in the industrial gas business as well,” Miyagawa promises.
The company’s industrial gas customers are manufacturers in diverse business sectors including medicine and automobiles. Iwatani’s position as a trusted industrial gas supplier led to the company supplying other products too, such as machinery required by industrial gas customers. The company’s position as an oxygen supplier led to opportunities to branch out into the medical market.
Organised for success
Iwatani does business not merely in the industrial gas and LPG fields but three other fields too. “These business fields are constructed of various industry sectors and customer segments: It goes without saying that users are really diversified.” The company is prepared to offer special, tailored packages that go far beyond industrial gases to a wide variety of users. “We are focusing on the local areas in the LPG business. Meanwhile, in the industrial gas field, our business offices are positioned in urban areas, but our plants are located in industrial areas.”
With annual sales of LPG reaching about 2.5 million tonnes, Iwatani has four large import bases, six medium-sized import bases and 117 filling stations all over Japan. “Concerning LNG, we sell LNG in conjunction with an electric power company. We built a satellite base in Shiga Prefecture, which supplies LNG for both industrial and general household use by pipeline.”
The company has been working closely with Praxair Inc. in technical and supply areas for over 20 years. “In addition, we’ve had longstanding business relationships with Japanese arms of other major gas companies of the world, some of which are joint ventures,” says Miyagawa.
Iwatani believes that the sharp expansions of the domestic market seen in the past will not be repeated. However, economic growth in China, Southeast Asia and other advancing countries looks very promising for the future, Miyagawa points out. “We think that the importance of overseas business development will increase from now on so that success and failure of investments into and return from Asia in particular will hold the key to the growth of our company.”
In the industrial gas market, competitive superiority can be achieved by owning plants in relevant areas, says Miyagawa. “There are areas where we don’t have any production bases or we have to bring in products from afar: We are dealing with such cases by mutual procurement with competitors in a form of alliance relationship.” In future the company aims to extend alliance relationships with competitors by area and gas type.
Drivers for the future
“We anticipate that the Japanese market with its fast-ageing population will be saturated enough to show the slow down of economic growth before long, and in some instances the size of Japanese economy may contract,” forecasts Miyagawa. Japan’s big challenge is to find ways to strengthen knowledge-intensive businesses that are supposed to create state-of-the-art technologies and bring forth a paradigm shift.
Currently, large-sized plant constructions for liquid crystal panels and solar cells are underway in Kansai area. “I think that such industries are still promising as those related to collaboration or what is called digital convergence across multiple industries including communication, broadcasting, IT and home electronics, and the environment, which is the worldwide issue.”
Iwatani has been moving ahead with improvements to its information infrastructure with the introduction of Enterprise Resource Planning (ERP) in association with its group companies.
Using enhanced back-office functions (such as sales and purchasing administration) that take advantage of information technology (IT), Iwatani is setting up customer calls to emphasise contact with customers. “No matter how digitalisation is expedited, it all comes down to the fact that the base of gas business is how fast and correctly we grasp the needs of customers through face-to-face approach and how appropriately we cope with them ahead of other companies,” says Miyagawa. “This seemingly runs counter to business efficiency, but the business of gas, which is the utility, cannot stand firm without improving relationships with customers.”
Iwatani shares a view common in the industrial gas industry that safety should take precedence over all else. “It is necessary and important that the safety standards are integrated and gases are used at the same safety level all over the world,” Miyagawa says. “As a member of IOMA, our company has been continuously coping with issues related to the world’s safety standards.”
Looking to the future, Miyagawa says that although Iwatani has yet to set out a concrete program, it is taking a look at East and Southeast Asian countries that have potential for growth, such as China, India, Thailand and Vietnam.
The industrial gas is an indispensable utility to customers in manufacturing. “To secure competitive superiority, what we have to do as a supplier of such a utility is to improve infrastructure for the supply of gases ahead of competitors.” Furthermore, Miyagawa believes, when marketing efforts, and closer relationships with customers in particular, become fully integrated with the competence as a supplier of gases, this helps build customers’ trust and leads to successful industrial gas business.
Iwatani’s core products – air separated gases or oxygen, nitrogen and argon – are usually said to have a market size expanding at a rate exceeding GDP growth. A growing economy is mirrored by a growing gas business. Looking five years ahead, Miyagawa says Iwatani is “positive in principle” about industrial gases.
“As the history of industrial gas has shown, I feel sure that the area for the use of gases will further spread,” he says. Miyagawa envisions that new industrial gas applications may be on the horizon that are not yet imagined. But industry, companies, countries and areas that will consume a huge volume of industrial gases are also changing. “In that sense, East and Southeast Asia will take on an increasingly important role.”
Today as never before, circumstances facilitate the alignment and realignment of gas companies in pursuit of further competitiveness, Miyagawa says. “We are now able to cope with big businesses which require huge amounts of investment. The upstream of industrial gas field will grow stronger in the future.”
Mr Takashi Miyagawa
Iwatani International Corporation’s Mr Miyagawa joined the company in March 1969, and moved into an appointment as Deputy General Manager of the Industrial Gases & Welding Division in April 2002. He became a Director later that year, and Executive Director in 2004. Miyagawa has been Senior Executive Director since June 2006. He enjoys golf and travel, as well as visits from his four grandchildren to the home he shares with his wife in Kyoto.
Iwatani’s goal is to become ‘needed by society’. Miyagawa explains how this translates into action in the business arena:
Liquid hydrogen has had long periods where it hasn’t been commonly used in the Japanese market for long periods of time, with the exception of rocket launching. As a pioneer of hydrogen business, Iwatani started operation of Japan’s largest liquid hydrogen plant, which enables the efficient production of liquid nitrogen by use of cold heat of LNG and liquid hydrogen from natural gas.
Iwatani has been rapidly expanding the liquid hydrogen market by introducing users to the advantages of liquid hydrogen, such as high purity, less space required and mass transportation, allowing a revolution in the Japanese hydrogen market.
“No one had experienced the supply of liquid hydrogen on a full-scale basis in Japan up until our plant went into operation. After overcoming many difficulties, such as jumping bureaucratic hurdles, we have been achieving our goal to become needed by society”.