Aluminum Sales May Climb to Record, Sumitomo Light Metal Says

Nov. 11 （Bloomberg） -- Sumitomo Light Metal Industries Ltd., Japan's second-largest producer of rolled aluminum products, forecast sales this fiscal year will climb to a record led by demand from carmakers.

Global sales of flat-rolled products are forecast to gain 15 percent from a year earlier to an all-time high of 346,000 metric tons, as demand is also growing from makers of lithium- ion batteries, LED lights and air conditioners, President Shigenori Yamauchi said in an interview.

Global vehicle sales are expanding, Yamauchi said. The company's sales of flat-rolled products to the auto industry represented 10 percent of total sales in the first half, rising from 7 percent in the same period last year. China's passenger- car sales in October rose at the fastest pace in six months as government incentives for fuel-efficient cars boosted purchases in the world's largest auto market.

The Tokyo-based company is considering building its first overseas production facility for flat-rolled aluminum within the next few years as growth in demand from customers outside Japan will outpace domestic consumption, Yamauchi said. The company allocated about 12.5 billion yen （$152 million） for overseas production expansion over the next three years.

China's aluminum demand is likely to total 16.8 million tons this year, an increase of 22 percent from 2009, according to Beijing Antaike Information Development Co.

Yen Appreciation

Japanese makers of cars and appliances are increasing overseas production and boosting raw-material purchases from local suppliers, as the yen has appreciated 12 percent this year, making exports more expensive. The company has to set up production bases overseas to keep up, Yamauchi said in Tokyo yesterday. "Exporting products is not enough to meet requirements from our customers," he said.

Exports represented 22 percent of the company's total sales volume of flat-rolled products in the fiscal first half. Sumitomo Light Metal, which operates a plant for extruded products in the Czech Republic, estimated that costs to build an aluminum-rolling mill overseas may be as much as 150 billion yen.

"That is too much investment for us alone," Yamauchi said. "We are considering options such as building a new plant with other Japanese or foreign companies, or investing in existing facilities." Possible locations include China, India, Southeast Asia, the Middle East and South America, he said.

Shipments Climb

Total shipments of rolled-aluminum products by Japanese makers increased 8.5 percent to 170,443 tons in September, expanding for the 10th straight month, according to the Japan Aluminium Association. The pace of expansion dropped from 13 percent in August as sales to carmakers slowed after the government ended subsidy payments for fuel-efficient models.

"We are not so optimistic about demand in the second half of this fiscal year, as effects of the stimulus measures by the government are fading," said Kunio Ishikawa, an association director. "The pace of growth may decline further, although the volume of shipments may stay above a year-earlier level."

Aluminum for three-month delivery on the London Metal Exchange climbed 0.2 percent to $2,453 a ton at 10:08 in Tokyo and has advanced 10 percent his year. The price climbed to $2,492 on Nov. 4, the highest level since September 2008.

Sales Gain

Sumitomo Light Metal's sales of flat-rolled products in the six months ended Sept. 30 gained 19 percent to 173,000 tons, as the government's subsidies to buyers of energy-efficient cars and electric appliances stimulated demand. The company expects to sell similar volumes in the fiscal second half, regardless of an end to the car subsidies program in September.

"Consumption of flat-rolled aluminum is supported not only by domestic users but also by overseas customers," Yamauchi said. "Demand for high-quality products made by Japanese mills will remain strong."

The company sold 36 percent of its flat-rolled products for use in cans in the fiscal first half. The ratio dropped from 44 percent in the same period last year on declining beer consumption in Japan, Yamauchi said.

Demand will likely be led by emerging markets such as renewable energy producers, as aluminum use will increase for solar cells and lithium-ion batteries that power electric cars and smartphones, he said.

Sumitomo Light Metal is the largest Japanese producer of aluminum products after Furukawa-Sky Aluminum Corp., according to the Japan Aluminium Association. The company's shares declined 1.1 percent to 91 yen at 11 a.m. in Tokyo.

--Editors: Jarrett Banks, Matthew Oakley