Japanese diecast aluminum alloy prices were capped despite the strong yen encouraging imports, because of excess domestic supply, market sources said Tuesday.
Import trades picked up this week on the stronger yen at Yen 100.50-100.70 to a dollar compared with Yen 101-102 last week.
One Japanese trader had concluded deals at $1,685-$1,720/mt CIF Japan, for 200-500 mt lots of Chinese ADC12 for November loading, saying that the stronger yen allowed deals in a wider range above $1,700/mt CIF Japan.
Most others rejected offers at $1,700/mt CIF Japan or higher. Some Japanese traders said $1,695/mt CIF Japan was not acceptable either.
As a result, trade volumes so far this week were up but marginally from last week, traders said. The price of $1,700/mt CIF Japan would be equivalent to domestic spot prices of Yen 185/kg ex-warehouse.
Imports at $1,700/mt CIF or higher had no competitive advantage against domestic supply, which were abundant, they said. "There are a few local offers below Yen 185/kg and I am waiting to see how low the offers can go. I think prices can fall only marginally as smelters have costs to cover, but I am not ready to accept $1,700/mt CIF Japan offer for imports either," said one consumer.
A month ago, Yen 185/kg ex-warehouse offers were limited to south Kanto and central Japan regions but it has become a mainstream price due to excess supply, said one Japanese secondary aluminum smelter official.
Japanese diecast alloy production fell in July, both year on year and month on month, industry data showed. July production was 38,766 mt, which was down 2.8% year on year.
June production reached 39,732 mt, up 5.5% year on year.
But supply still outstripped consumption, sources said.
Production by Japanese automakers over October-December is expected to decrease by around 10% from the April-September level.
Output had surged after May in an effort to cover lost production in southern Japan after an earthquake in April.
Although car production in 2016 is likely to stay in line with initial targets, negative outlook is spreading because Japanese automakers have not been able to come up with clear sales expansion strategies, sources said.
"The automakers may try to focus on exporting large vehicles overseas rather than focus at home. But the strong yen at Yen 100 is not good for exports," said the consumer.
Some car models are showing strong sales in Japan.
Nissan Motor's family van model Serena has recorded sales of 20,000 vehicles in one month after its release, beating its target for 8,000 vehicle sales, the automaker said Tuesday.
Serena's ADC12 consumption is around 90 kg, traders estimate.
"But Nissan group's overall ADC12 demand has not changed because of poor sales of other models, particularly the Mitsubishi brand," said a third Japanese trader.
Nissan Motor acquired 34% stake in Mitsubishi Motors this year, following a fuel emission reporting fraud at Mitsubishi Motors.
