Asahan's woes trim Japan aluminum stocks
Asahan's woes trim Japan aluminum stocks
TOKYO (Reuters): Japanese aluminum buyers are looking forward
to expected production cuts at PT Indonesia Asahan Aluminum this
year, which should help trim huge domestic inventories, traders
say.
"Asahan would be a nice adjustment," said an aluminum trader
at Mitsui & Co Ltd. "We expect the trouble at Asahan to lead to a
product cut of more than 100,000 tons this year." He was
referring to the disruption of power at Asahan's Sumatra plant
due to falling water levels.
Seven Japanese trading houses, including Mitsui, five
aluminum mills and the Overseas Economic Cooperation Fund (OECF)
have an indirect stake of 59 percent in PT Indonesia Asahan
Aluminum.
Other traders at Japanese houses and mills also agreed
Asahan's output was likely to dwindle to near 50 percent of its
capacity of 220,000 tons due to falling water levels in the Toba
lake which supplies power to the plant.
An official at Japan's Nippon Asahan said on Wednesday that
Asahan was in talks over additional production cuts at the
smelter in northern Sumatra with the Indonesian government.
In April, Asahan said it would reduce its output to a maximum
of 175,100 tons in the fiscal year that started on April 1,
compared with its annual capacity of 220,000 tons.
"We're wondering if Asahan is becoming a bullish factor. But
unfortunately domestic demand is even weaker at the moment," said
a trader at an aluminum manufacturer.
"Japanese annual demand stands at around 2.45 to 2.5 million
tons. At the moment we have stocks to cover demand for about 2.7
months," he said, adding that inventories at four ports alone
stood at 463,000 tons at the end of April.
Japan usually imports about 135,000 tons of aluminum ingots
from Asahan each year. It bought 31,950 tons of the metal from
Indonesia in the first three months of this year.
While Mitsui forecast Japanese aluminum demand would slip 1.7
percent this year to 2.365 million tons from 2.407 million tons
last year, other traders were more bearish in light of a sharp
downturn in the construction sector.
Analysts have said housing starts were unlikely to recover in
the near future after plunging by 17.7 percent to 1.34 million
units in the year ended March 31.
Reflecting the steep downturn in housing starts, window frame
makers have slashed production by as much as 20 percent so far
this year, traders said.
"I wouldn't be surprised if we saw a decline of five percent
or more," said a trader at a European house.
"We've seen production cuts of some 20 percent in the housing
sector alone. Others, including the car sector, aren't doing well
either. I personally am pessimistic."