TOKYO -- Tumbling crude oil prices will likely depress earnings at Japanese oil distributors and trading houses by a combined 1 trillion yen ($8.36 billion), even as the cheaper fuel props up logistics companies.
Crude has fallen from just under $100 a barrel at the end of 2013 to the $45 range. Oil distributors must maintain 70 days' worth of inventory, meaning that declining market prices result in valuation losses.
TonenGeneral Sekiyu likely suffered a valuation loss of slightly below 100 billion yen for the fiscal year ended December, resulting in a roughly 80 billion yen operating loss. The company had booked a 52.2 billion yen operating profit the year before. Showa Shell Sekiyu likely sustained its first operating loss in five years in fiscal 2014.
If crude stays at around $50 a barrel, Idemitsu Kosan could post a valuation loss of around 100 billion yen, and Cosmo Oil could also end up with tens of billions of yen in inventory write-downs as well. Both companies are expected to post sharply lower operating profits or suffer operating losses for the fiscal year ending March.
Crude's downturn has also driven funds away from the commodities market and weighed down prices of such resources as copper. Trading house Marubeni will book a 160 billion yen impairment loss on resource concessions abroad for fiscal 2014, while Sumitomo Corp. sees a 270 billion yen loss from a shale oil project and other factors.
Sumitomo Metal Mining's operating profit could decline roughly 3 billion yen for the fiscal year ending March if copper prices stay at current levels. And at Mitsubishi Materials, profit may fall more than 1 billion yen.
But cheap fuel stands to lift profits at many other corporations, especially in the logistics industry. Maritime shipping company Nippon Yusen's April-December pretax profit likely jumped 20% on the year to about 59 billion yen. Kawasaki Kisen is expected to post 40% growth in pretax profit to roughly 42 billion yen. A key type of bunker fuel is now just under $300 per ton, less than half the level from six months ago.
ANA Holdings' April-December operating profit likely soared 30% on the year to about 90 billion yen. More travelers chose to fly both in Japan and overseas, and demand for international air shipments proved strong, with cheap crude further lifting profit. ANA and Kawasaki Kisen reached their full-year profit targets in the first three quarters alone.
If U.S. benchmark West Texas Intermediate crude stays at $50 a barrel, major corporations could see a 2% drop in pretax profit for fiscal 2014 but a 5% jump the following year, according to Daiwa Securities. With the Japanese economy heavily reliant on oil imports, soft crude prices will lift profit in a wide range of industries.