Slowdown to force Japan's aluminium sector to consolidate:sources

Tokyo (Platts)--8, Dec2008,The recent economic slowdown will force Japan's secondary aluminium alloy industry to consolidate, probably in the first quarter of 2009, local market sources said Monday. Last week, Japanese automotive components makers, local producers of secondary aluminium alloy and local trading houses started negotiations for prices of alloys in the first quarter of 2009. Trade and alloy producer sources in talks said some buyers suggested reducing purchases by up to 50% from the same period last year. "Our customers are not sure about demand dropping by, say, 50%, but customers of our customers, the automakers, do not have an outlook yet, so they are making conservative estimates," one source said. Japan has the capacity to produce up to 110,000 mt/month of aluminium alloy. Japan's automotive sector consumes roughly 100,000 mt/month, and if this consumption is reduced by 30-50%, the industry will require only 50,000-70,000 mt/month. In addition to local supply, Japan also imports aluminium alloy from overseas. The monthly import volumes often exceed local production when the US dollar weakens. In August, when demand typically weakens due to summer holidays, Japan still imported 87,125 mt, more than the August production of 83,230 mt. Japan had excess supply of aluminium alloy currently, sources said. "Overseas suppliers are quoting competitive prices, and it is either Japan continues to import until local alloy producers disappear, or the local players consolidate," said one trader. There are over 20 secondary aluminium alloy producers, employing 5,229 people in Japan, according to the 2006 census and other public data.