Japanese trading house Marubeni Corp is refocusing its energy trading on naphtha and liquefied natural gas (LNG) and away from crude as it targets becoming a niche market player in a tough environment, the head of the business said.

Japan’s trading firms have struggled to stay competitive in the energy trading business in recent years as domestic oil demand has dwindled and crude’s low price volatility has depressed margins.

And with tighter regulation reshaping the energy trading industry, large international trading firms such as Trafigura, Vitol and Glencore have gained prominence in the business.

“The role of Japanese trading firms is changing,” Yasuaki Suzuki, general manager of Marubeni’s energy trading department, told Reuters.

“In the past, we traded almost everything, but with low margins and hard competition, the Japanese traders are now increasingly becoming niche players, concentrating more on certain products,” said Suzuki.

Marubeni, one of Japan’s top-5 trading houses, is pulling back on crude and fuel oil trading, instead narrowing its focus on naphtha and LNG, while continuing to supply gasoline and kerosene to Japanese customers, said Suzuki, in an interview during an annual industry gathering. The company traded around 11 million tonnes of naphtha last year, but a current depressed market makes it hard to increase volumes.

“I think naphtha will recover in the fourth quarter. But currently the market is in contango, and we have to sell to South Korea at a discount, so we are struggling to make money in the current situation,” Suzuki said.

Contango is a market structure where future prices are higher than for immediate delivery, suggesting weak current demand. Marubeni no longer has fuel oil storage capacity in Singapore and has cut staff in its office there, although it plans to keep overall headcount in the company’s energy trading department intact.