Devalued Japanese Yen Mostly Spares Taiwan's Aluminum Industry
2013/10/03 | By Steve ChuangWith the yen-to-greenback rate having risen above 100 from sub-90 over the past year, some of Taiwan's export-driven industries, especially those able to rival against Japanese counterparts, such as machine tools, have seen mixed impacts. But, the Metal Industries Research & Development Centre (MIRDC), a Taiwanese government-funded research institute, opines that the aluminum industry has been moderately dampened by the weaker yen for some reasons.
Production
It is safe to say that aluminum production is increasingly important to Taiwan's economic development, especially when information technology-based and consumer electronics, as well as exports of automotive parts, widely call for the lightweight metal for obvious reasons, not least of which being high tensile-strength-to-unit-mass ratio.
According to MIRDC's statistics, Taiwan's aluminum industry produced about 810,000 tonnes of aluminum and related products valued at around NT$83.5 billion in 2012, which have remained unchanged from 2011.
Aluminum castings, recycled aluminum ingots and billets, and extruded aluminum profiles, and rolled aluminum products commanded a share of 34%, 25%, 24% and 17%, respectively, of the industry's overall output value last year. Rolled aluminum products, recycled aluminum ingots and billets, and extruded aluminum profiles were the industry's main exports, generating revenue of NT$11 billion, NT$9 billion and NT$3.4 billion, respectively.
Taiwan consumed in 2012 about 700,000 tonnes of aluminum ingots and billets to command a 1.4% share of the global total, with per-capita consumption of 30 kilograms to equal that in developed countries.
Taiwan-Japan Similarities
MIRDC says Taiwan and Japan have similarly structured aluminum industry, with both lacking sustainable primary production of mining and smelting.
Upstream aluminum producers in Taiwan is made up of ingot and billet smelters, whose products are generally recycled aluminum ingots, billets and extruded aluminum ingots, billets, while in Japan upstream manufacturers work on high-purity aluminum and recycled aluminum, says MIRDC.
Taiwan imports nearly all high-purity aluminum from Japan, and then, in return, exports recycled ingots, billets and automotive wheels. Last year Taiwan had a trade deficit with Japan in basic metal trading, mostly advanced materials and others that are not manufactured domestically such as aluminum foil for electronic devices, beverage cans, and rolled copper foil, of some US$3.85 billion.
Imports & Exports
Since Taiwan depends considerably on supply of advanced metals from Japan, aluminum foil and sheets therefore make up the majority of the local aluminum industry's imports from the country.
Taiwan Customs statistics show that the island imported 16,876 tonnes of various aluminum products, valued at NT$5.7 billion, from Japan last year, with 3,423 tonnes being aluminum foil valued at NT$2.12 billion, 12,003 tonnes of aluminum plates and sheets worth NT$2.1 billion and other aluminum products worth NT$1.46 billion.
MIRDC says that imported aluminum foil is mostly high-end with purity rated over 3N specifically for electronic devices, while aluminum plates and sheets are for production of metal cans, anodized coils for 3C (computer, communication and consumer electronic) devices, and high-precision plates. Applications of other imported aluminum products include semiconductor manufacturing and aluminum targets with high purity of 4N used by optoelectronic companies.
On the other hand, Taiwan's aluminum-related exports to Japan reached some 40,000 tonnes with value of around NT$4.7 billion in the same year, including 25,000 tonnes and NT$1.81 billion of recycled aluminum ingots and billets, mostly with a grade of ADC10 or ADC 12 per JISH 2118 and used for production of die castings for vehicles; 4,556 tonnes and NT$1.29 billion of aluminum products, including die castings, forgings, venetian blinds, mechanical hardware, and so forth; 5,188 tonnes and NT$990 million of car wheels for aftermarket; and 4,979 tonnes of rolled aluminum products and extrusion profiles that together commanded a 13% share of the total value.
Aluminum plates and sheets totaled some 66,000 tonnes to command a 67% share of Taiwan's overall aluminum-related exports and total NT$8.3 billion in value in the year, with the average price of NT$126 per tonne. Of the total volume, 64% went to China (including Hong Kong), where fierce competition exists between Taiwanese suppliers and rivals from Japan, South Korea and Germany. MIRDC said that imports from the four abovementioned countries in the Chinese market accounted for 65% of the total, with those from Taiwan priced at US$4.6 per tonne, compared to US$5.4 from Japan, US$4.4 from Germany and US$3.7 from S. Korea.
Effects of Weak Yen
MIRDC says that some downstream Taiwanese manufacturers using aluminum and related products are benefiting from weaker Japanese yen, which has caused prices of imported materials and products from Japan, including aluminum electrolytic capacitors and aluminum targets, to drop. Furthermore, cheaper imports have also helped Taiwan to reduce its trade deficit with Japan.
Meanwhile the impact of depreciating yen on the Taiwanese aluminum industry has been more moderate than expected, primarily because aluminum-related imports from Japan are mostly advanced materials and high-end products that are not manufactured domestically, excluding cans and anodized aluminum coils, says MIRDC.
On another front, MIRDC says, although devalued yen has diminished Taiwanese suppliers' price competitiveness against Japanese competitors globally to some extent, the flipside is that the island's aluminum-related exports to Japan will likely grow steadily despite current prices being slightly higher than several months ago, as the weakening yen along with credit easing is part of “Abenomics” to stimulate the domestic market and economic growth, which drive stronger local demand for imports.
The cheaper yen has certainly enhanced Japanese companies' price competitiveness in the Chinese market for aluminum and related products, MIRDC says, without impacting Taiwanese suppliers mainly due to being in different segments. However, MIRDC says that the weaker Korean won is dampening Taiwanese supplier competitiveness because of similar product offerings.
MIRDC says that Taiwan's aluminum industry as a whole is little affected by weaker Japanese yen for now, and advised local suppliers to step up upgrading, ride this wave to explore new business opportunities and sharpen competitive advantages by acquiring technologies from Japan, secure sustainable development, and steel themselves for the possibility of further devaluation of yen in the short term. (SC)
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Category | Value | Volume | Average Price |
Aluminum Foils | NT$2.12 Bn. | 3,423 tonnes | NT$620 |
Aluminum Sheets | NT$2.10 Bn. | 12,003 tonnes | NT$175 |
Aluminum-made Products | NT$1.46 Bn. | 1,450 tonnes | NT$1,011 |
Total | NT$5.68 Bn. | 16,876 topnnes | NT$336.0 |
Source:
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Category | Value | Volume | Average Price |
Aluminum Alloy Ingots and Billets | NT$1.81 Bn. | 25,662 tonnes | NT$70.5 |
Other Aluminum-made Products | NT$1.29 Bn. | 4,556 tonnes | NT$285 |
Wheels | NT$ | 5,188 tonnes | NT$191 |
Aluminum Plates and Sheets | NT$ | 4,253 tonnes | NT$110 |
Aluminum Foils | NT$ | 439 tonnes | NT$182 |
Aluminum Extrusion Profiles | NT$ | 276 tonnes | NT$270 |
Total | NT$4.71 Bn. | 40,373 tonnes | NT$110 |
Source: