Japanese consumers reduce inventory on housing slowdown

Tokyo -- Japanese aluminium consumers are reducing inventory of aluminium ingot, on the back of slowing housing construction in the country, industry sources said on Wednesday. Manufacturers of extruded housing parts sold off their aluminium ingot to local trading houses in late September to reduce inventory before the first semester of fiscal 2007 ended, manufacturer and trade sources said. One manufacturer source added that his company was likely to sell more after October as the company still had excess aluminium. Trade sources said makers sold, or have offered to sell, 1,000 mt or more of aluminium ingots in late September. Sales prices were generally set at London Metal Exchange cash prices plus premiums, paid in yen, sources said. The premiums were a few dollars lower than the import premiums of $65-66/mt for the current quarter. "Domestic aluminium premiums currently stay supported above $60/mt so I think the discount was small," said one trader. Another trader close to a deal described it as a storage job, as consumers would be able to buy back the metal when demand for their products picked up. Housing parts manufacturers are under pressure from a slowdown in housing construction. Japan 's new dwelling constructions in August plunged 43.3% year on year, to 63,076 units, according to one government report. The plunge was due to changes in the Japanese construction laws in June that required stricter structural safety inspections, said an official of the Ministry of Land, Infrastructure and Transport. "The industry is not used to changes in the document format, the new procedures," the official said, adding that he hoped the industry wouold be more at ease with the new system by the end of this year. A trader expressed his hope that once large construction projects, which take longer time to inspect, are approved, aluminium demand will improve. But industry sources agreed that the new inspection system was one of many other factors causing the demand slowdown. In August, production of aluminium sashes for dwellings was 9,286 mt, down 18.5% year on year, aluminium sashes for buildings 9,094 mt, down 5.4%, and exteriors 6,276 mt, down 14.8%, according to another government report. An official of the Ministry of Economy, Trade and Industry said the August production plunge and the new construction law were unrelated. "Production volumes fell because there is a shift to use more resin and less aluminium," she said, adding that the impact of the new law would start to show after September. A mill source attributed the falling production to slowdown in the electronics sector as well. Electronics equipment manufacturers have delayed plans to build new plants, and this has decreased the construction material demand, he said. Japanese rolling mills and major construction material manufacturers toldPlatts on Wednesday that some of their plants were forced to decrease operating rates but no plant had suspended production.