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Japan Metals Report Q4 2011
Business Monitor International, Oct 2011, Pages: 67
The earthquake in Japan in March 2011 will have a significant bearing on the country's metals industry for years to come. In the short term, the disruption halted production at several copper and aluminium refineries. It is also set to hurt demand as the economy has now slipped back into recession. However, BMI expect demand and supply of metals to pick up as reconstruction efforts begin. Steel and aluminium are the two sectors most likely to benefit as much of Japan's infrastructure around the epicentre of the earthquake has been damaged. Over the long term, BMI expect production and consumption trends to fall back to low single figures, in line with growth forecasts for the Japanese economy as a whole. Japan remains one of the largest producers and consumers of these metals, but faces a declining share of world output and demand as China and, to a lesser extent, India, rapidly increase production and consumption in most metals.
BMI expect steel production to rebound on the back of increased demand as construction efforts get underway. However, producer margins are likely to remain tight as iron ore and coal prices continue to rise, only some of which can be passed onto the consumer. BMI expect a continuation of the long-term decline in primary aluminium production, with output falling by an annual average of 2.3% per year to 4.20 thousand tonnes (kt) in 2015, from 4.61kt in 2010. BMI expect secondary aluminium, which accounts for the vast majority of the country's refined aluminium output, to grow at an average rate of 5.9%, reaching 1.15mn tonnes (mnt) by 2015, from 870kt in 2010. Consumption growth will be more modest, growing by an average annual rate of 3.6% and reaching 2.42mnt in 2015, up from 2.03mnt in 2010.
BMI have lowered their forecasts for the production and consumption of copper following the earthquake in Japan in March 2011. BMI now expect production to grow by 1.3% in 2011 from 3.8% previously and consumption to grow by 2.1% from 3.7% in their last forecast. BMI have maintained their long-term forecasts as BMI expect demand and supply of refined copper to pick up as reconstruction efforts get underway. Finally, BMI forecast nickel production to reach 217kt in 2015, marking an average annual rate of growth of 5.8% from 164kt in 2010, with Sumitomo Metal Mining leading growth as it increases output at its Niihama refinery, the country's largest, from 41 to 63ktpa in 2013. In addition, BMI forecast consumption growth to average 2.8% per annum from 204kt in 2010 to 178kt in 2015.
Overall, BMI expect production of refined metals to outpace growth in demand, leading to an output surplus over the coming years. Indeed, BMI expect Japan to become a net nickel exporter by 2013, whereas the country has been reliant on imports for the past decade. BMI therefore expect Japan's exports of refined metals to increase, with the primary export market being China – a market BMI expect to remain reliant on imported metals, at least in the short to medium term.
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