Japan Aluminum Scrap Exports Seen at Record as S. Korea Buys

Japan’s exports of aluminum scrap are headed for a record this year as a weaker yen and higher recycling capacity in South Korea boost shipments, according to Mitsui Bussan Metals Co.

“This year’s exports will be a record if the yen and aluminum prices remain stable,” said Shigeyuki Fukushima, executive vice president of the unit of Mitsui & Co., Japan’s second largest trading house. Shipments reached an all-time high of 148,000 metric tons in 2009 and were 120,000 tons in the first nine months of this year, finance ministry data show.

An increase in scrap exports would benefit trading houses like Mitsui and Hanwa Co. Demand for scrap in the Asian automotive market is expected to exceed the 25 percent compound annual growth rate projected globally over the next five years, as more carmakers move to build lighter, more fuel-efficient vehicles, according to Atlanta-based Novelis Inc. A 12 percent depreciation of the yen this year against the Korean won has kept Japanese scrap attractive to buyers.

“Average prices of aluminum scrap have increased as South Korean purchases rose, especially for cans and window frames,” Fukushima said yesterday. Korean customers prefer Japanese scrap because of its higher quality and close proximity for inspection before shipments, he said.

The scrap exports to South Korea contribute to Japan’s trade surplus with its neighbor that stood at 184.6 billion yen ($1.9 billion) in September and helped trim the nation’s overall deficit.

Export Prices

Export prices for aluminum scrap, including cans, to South Korea rose to 148.8 yen per kilogram in September, compared with 113.9 yen a year earlier, according to data from the finance ministry. Japan is Asia’s second biggest aluminum consumer while South Korea is the fourth biggest, according to the International Aluminium Institute.

Japan’s exports rose 24 percent in the first nine months from 97,000 tons a year ago, the data showed. Shipments to South Korea more than doubled to 47,401 tons in the period, while exports to China fell 2.8 percent to 60,100 tons.

Aluminum-can scrap prices in Yokohama jumped to 147.7 yen per kilogram in December from 101.6 yen in the same month a year earlier, according to tender results from the city government. That was the highest since May 2010, the data showed. A rise in scrap prices will support aluminum prices.

Novelis Expansion

Novelis last year opened Asia’s largest aluminum beverage can recycling center in South Korea with a capacity of 265,000 tons. The unit of India’s Hindalco Industries Ltd. last month completed a two-year, $400 million expansion program in South Korea, it said in a statement Oct. 10. Expansion at its Yeongju and Ulsan plants increases the company’s annual production capacity in the region by more than 50 percent to about 1 million tons of aluminum sheet.

Novelis plans to raise global recycling capacity to 2.1 million tons by 2015 and to 4 million tons by 2020 from 1.2 million tons in 2012, Derek Prichett, vice president for global recycling, said in October 2012. The company plans to make 50 percent of its products from recycled metal by 2015 and as much as 80 percent by 2020, from about 39 percent, Prichett said.

The metal for delivery in three months on the London Metal Exchange has dropped 13 percent this year and traded at $1,807 a ton by 2:07 p.m. in Tokyo.

LME aluminum stockpiles totaled 5.3 million tons after reaching a record 5.5 million tons on July 17. The metal is the second-worst performer among six base metals on the London Metal Exchange.