Japanese automotive aluminium demand outlook for Q4 down as automakers to cut output

According to a Platts report, Toyota Motor has recently announced plans to cut its Q4 passenger car output by 10% at Japanese plants. The process will be started in Q3 itself and this has compelled Japanese aluminium alloy suppliers to reconsider their output as a large part of aluminium demand comes from the auto industry and Toyota has been the forerunner in the segment.

Toyota Motor informed its suppliers that it plans to cut vehicle output by 5%-10% in October-December and it will be effective from July-September period. The announcement came just before its aluminium alloy tender opening for the current week.

In April, Toyota had a production setback due to April Kumamoto earthquake which had forced some Toyota components suppliers to suspend their output. To compensate the production losses, the automaker ramped up production during the June-July period. Suppliers have different opinions regarding the production cut. Some suppliers feel that despite the 10% output cut, Toyota will target to produce 3.2 million passenger vehicles in Japan in 2016. Another group of suppliers however feels that this announcement from Toyota indicates a dark demand outlook for fourth quarter.

"But I suppose domestic car sales showed that demand was not there and Toyota decided to slow down," said one aluminium supplier source. "I would assume that ADC12 ingot will be affected more than molten aluminium," the source added.

Toyota uses ADC12 ingot in their production both from import sources and from local smelters. But, molten aluminium is supplied only by local smelters.

According to the latest data from the Japan Automobile Manufacturers Association (JAMA), passenger car sales in Japan recorded a slight drop of 2.17% in July 2016 YOY, with mini size passenger car sales again being the main driver of the fall.

Nissan is another significant demand driving automaker in Japan. Suppliers to Nissan are of the view that the auto market is not all pessimistic and they are positive about Nissan and other automakers who would seek supplies for October, Q4 or October-March this month.

Nissan is very positive about the sale of their family van model, Serena, which was remodelled last month. According to a supplier to Nissan the automaker may raise Serena output to 10,000 vehicles per month.

"Our Serena sales target is 8,000 vehicles/month including low season period," said the Nissan spokeswoman. Serena sales were 6,000-7,000 vehicles/month before the remodelling.

It is however, to be noted that the situation is not same for all the car models. The auto market in Japan has no clear growth indication and this is compelling automakers to cut down their sales target in particular segments. The secondary aluminium alloy smelters are buying for one to two months consumption only, due to uncertain alloy demand outlook and already hoarded inventories.

"I can't read demand. We have not finalized our output plan for October-December," said a source at a secondary aluminium smelter, who will be participating in the Toyota Motor tender.

According to latest industry data, Japanese automakers consumed 83,000 mt of diecast aluminium alloys, mostly ADC12 alloys for making 804,201 passenger vehicles and 11,828 commercial vehicles.

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