PLATTS FEATURE: Japan-China island spat hurts both as aluminum demand slows
Tokyo (Platts)--17Oct2012/534 am EDT/934 GMT
The spat between Japan and China over the East China Sea islands was
hurting both countries' economies, and the effects of this dispute has begun
to trickle down to impact various industrial sectors, including the aluminum
market, industry sources said this week.
The declining sales of Japanese cars and electronic appliances in China
were affecting Japanese manufacturers, the Chinese metal suppliers and others
down the supply chain.
The current slowdown in Japanese car sales in China has lowered demand
for ADC12 aluminum alloy, which is used for car engines.
A diecaster in Japan said Japanese automakers' China output over
October-November was roughly half of planned levels. "Most have not decided
for December. They are monitoring the sales trends and signs change
everyday," he said. While most Japanese diecasters in China are seeing a
sharp fall in orders like the automakers, his company was less affected as
its Chinese plant exports to Japan.
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The slowing car sales in China affected diecasters in Japan as they
export components to China. They see a 10%-30% cut in demand from before the
spat, while waiting for more elaborate data from the automakers.
"It is not just the China impact, but slowing car sales in Japan [due to
the end of the government subsidies for fuel-efficient car purchases in
September] and declining consumer spending [worldwide]," have impacted
Japanese diecasters, added a secondary aluminum smelter.
ADC12 PRICES DROP
The spot price of ADC12 -- used for diecasting -- exported from China has
dropped since end September, and Japanese traders and Chinese producers both
cited slow demand. Chinese ADC12 accounts for roughly 30% of Japanese
One diecaster said his company started to test European ADC12 supplies
as it was risky to depend on one country for imports.
Platts assessed the spot ADC12 export price at $2,140-2,180/mt FOB China
on October 16, down from $2,160-2,180/mt FOB China on September 18, three
days after protesters set fire to Japanese car showrooms at Jindao.
Import prices are pressured lower as they compete with Japan's domestic
ADC12 supplies that account for around half of the country's demand, said one
Japanese trader. "Domestic prices are around Yen 180/kg [equivalent to
$2,150/mt CIF excluding local freight costs] and my customers are taking it
easy. They can buy any time, there is plenty of supplies," he said.
ADC12 alloy contains up to 12% silicon, which Japanese smelters import
from China as there is no local production.
A silicon metal trader said order volumes for 98.5%-553 grade silicon
were down by around 10% from his previous expectation. "Smelters want to keep
stocks as low as possible, as they don't know what to expect," he said.
The spot price of 98.5%-553 grade silicon metal imported into Japan was
up to $2,000-2,040/mt CIF Japan on October 11, from $1,970-2,020/mt CIF on
September 20. The price was up reflecting the anticipated higher power costs
with the winter season approaching, but demand was sluggish, sources said.
"Price climbs up when buyers come into the market, and falls when they
go away. Offers below $2,000/mt are there again," said a secondary aluminum
smelter source on October 16.
CHINESE SECONDARY ALUMINUM SMELTERS HIT
Dwindling ADC12 alloy demand in Japan is seen to hit Chinese secondary
aluminum smelters and silicon metal producers focused on sales to Japan,
"The smelters have been operating in a difficult environment since the
2008 global financial crisis and the middle-sized 5,000 mt/month smelters are
discussing whether they should be in this business next year or not," said a
Some Chinese smelters were sourcing aluminum scrap from Japan.
In September, two of the largest scrap aluminum exporters in Japan, FE
Material and Yoshinaka Shoji, closed down due to faltering demand in China.
The latest spat was unlike the 2010 island dispute when a Chinese
fishing boat captain was arrested by the Japanese authority September 7,
after colliding with a Japanese coastguard vessel. That dispute resulted in
China restricting exports of rare earth and other metal resources to Japan,
leading to a rise in metal prices. Toyota and other automakers had continued
normal operations in China amid the 2010 spat.
The spot export price of Chinese ADC12 moved up to $2,180-2,200/mt FOB
China on September 28, 2010, from $2,140-2,160/mt on September 7, 2010.
The spot price of silicon metal imported into Japan climbed to
$2,500-2,520/mt CIF Japan on September 30, 2010, from $2,250-2,300/mt CIF
Japan on September 3, 2010, on fear of a supply shortage.
But metal trade and prices stabilized in 2011. Metal buyers were able to
pass on higher costs to their product prices. Market demand was healthy and
companies did not suffer major losses in revenue as a direct result of the
--Mayumi Watanabe, firstname.lastname@example.org
--Edited by Geetha Narayanasamy, email@example.com