Increased spending by the Japanese government on making infrastructure earthquake-resistant has fueled demand for aluminum, but that for aluminum ingot is still weak amid high stocks, market sources said Monday.
Sales of aluminum floor sheets, roofing, handrails and other components used to build pedestrian bridges, for example, and public facilities have increased by 50% since April compared with the first quarter, said a trader who deals with finished aluminum products.
"Due to more projects, orders for aluminum structural parts for buildings and bridges, to replace concrete, have gone up," a Tokyo-based trader said. "This is because aluminum parts are lighter and will not cause as much damage in case they fall."
Japan Aluminium Association member firms making semi-finished aluminum products such as sheets and extrusions reported a pickup in demand last month, an association official said, though he could not give any figures. The association's monthly data for June is yet to be released.
In May, aluminum sheet and extrusion shipments to the construction sector stood at 43,530 mt, down 0.7% year on year, according to the association.
"It is not like there is a boom, but inquiries have increased," he added.
On March 11, the Abe government approved a supplementary budget of more than Yen 10 trillion ($10 billion) for fiscal 2012-2013 to boost the economy.
"We are expecting public spending on non-housing infrastructure in fiscal 2013 [running from April 2013 to March 2014] to increase by 64.9% year on year to Yen 3.1 trillion, due to the fiscal 2012 supplementary budget," said Masao Yoshida, an official from the Ministry of Infrastructure, Land, Transport and Tourism, which puts out the outlook for the construction sector.
The infrastructure projects are to make public schools, laboratories, government offices and other government-run facilities more earthquake resistant, Yoshida said. The projects do not, however, include housing. Aluminum ingot manufacturers, however, are holding high stocks of ingot, billet and other raw materials, market sources said.
"The [rising demand] is spreading to the downstream part of the supply chain, but has yet to be seen upstream because of stockpiles built up in January on expectation of reconstruction demand and ahead of the consumption tax hike in 2014," said a Tokyo-based trader.
Stocks of aluminum products stored at Japan's three main port warehouses stood at 272,300 mt at the end of May, according to trading house Marubeni. This is the highest level seen for the month since May 2005.
Many of the aluminum fabricators focus on the housing sector, which is five times the size of public infrastructure building.
"Our April-June sales for housing parts [aluminum, resin and other materials] were up 10% year on year," said Chieko Kawai, a spokeswoman for YKKAP, a construction materials manufacturer.
The ministry has forecast a 6.6% year-on-year growth to Yen 15 trillion for the housing sector for fiscal 2013-2014, even as the infrastructure building sector, which is smaller, is expected to rise 64.9%.
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