Nippon Light Metal to Boost Aluminum Output in China on 16% Demand Growth
Nippon Light Metal Co. will boost aluminum product output in China as demand from the world’s largest consumer may grow 16 percent annually in the next five years, the company president said.
The fifth-largest Japanese maker of rolled-aluminum products plans to add at least two production facilities in China within three years on demand growth, Takashi Ishiyama said in an interview.
Aluminum in London is little changed this year, curbed by concern that the recovery in advanced economies may stall as Europe’s sovereign-debt crisis spurred governments to narrow fiscal deficits and cut stimulus spending. Nippon Light Metal raised its earnings forecast for the year to March 31 and expects growth in China and other Asian markets to offset any slowdown in the U.S., European and Japanese economies.
“Aluminum demand in China is expected to grow as automakers will increase the use of the metal to reduce vehicle weight for fuel efficiency,” said Tadao Hosoo, an economist at Mitsubishi UFJ Research & Consulting Co. in Tokyo. “China’s per capita consumption of the metal is still very low compared with other countries, which means the nation has large potential for demand growth.”
Nippon Light Metal raised its forecast for group net income on July 30 by 18.2 percent to 6.5 billion yen ($75 million) and revenue outlook by 5.3 percent to 400 billion yen. It doesn’t disclose sales volumes of aluminum products, Ishiyama said.
“Asia will have a bigger impact on our business” than the U.S. and Europe, Ishiyama said in Tokyo yesterday.
Nippon Light Metal expects its overseas sales will represent 19.4 percent, or 83 billion yen, of total revenue in the year beginning on April 1, 2012, from 17 percent this year. China may account for 40 percent of the overseas sales, while Thailand and other Southeast Asian nations may represent 40 percent, Ishiyama said.
The company operates six production facilities in China and two in Thailand, supplying makers of cars and cans. China is expected to represent 30 percent of overseas sales forecast at 68 billion yen this fiscal year, according to spokesman Yoshinori Nonaka.
Aluminum product sales in Japan, Asia’s largest importer of the metal, may grow at a slower pace in the second half of this fiscal year than in the first half as the government will end its car subsidy program, Ishiyama said.
Japan’s shipments of rolled-aluminum products increased 14 percent in June, gaining for the seventh straight month led by demand from auto and electronics makers, data from the Japan Aluminium Association showed on July 28.
The pace of expansion may slow to around 10 percent, said Ishiyama, who is also the chairman of the industry group. The Tokyo-based company, along with rivals Furukawa-Sky Aluminum Corp. and Kobe Steel Ltd., benefitted from government subsidies and tax cuts that boosted sales of energy-efficient cars and electric appliances.
Japanese automakers may cut domestic production in October by 10 to 20 percent from the previous month as the government will end subsidy payments to buyers of fuel-efficient models at the end of September, according an Aug. 4 report by the Nikkei newspaper. The industry consumed about 14 percent of Japanese aluminum products shipped in June.
A slowdown in Japanese shipments may be moderate as sales to other Asian markets will remain strong in the second half, Ishiyama said. Exports jumped 68 percent to 115,527 metric tons in the six months ended June 30, representing 11 percent of Japan’s total shipments, the association’s data showed.
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