Japan has a well-established aluminium casting industry with a long history of producing high-quality aluminium products for various sectors, including automotive, electronics, construction, and aerospace. Aluminium as a metal has been a key player in Japan's manufacturing sector, contributing significantly to the country's economy. The automotive sector is one of Japan's largest consumers of aluminium castings.
Aluminium parts are used extensively in vehicle manufacturing due to their lightweight properties, contributing to fuel efficiency and overall performance. Components such as engine blocks, transmission cases, cylinder heads, and suspension parts are commonly made using aluminium casting.
Japan – 4th largest automotive market
Japan is the world's fourth-largest automotive market, following China, the United States, and India. Renowned as a global leader in motor vehicle manufacturing, Japan hosts major automakers such as Toyota, Honda, Nissan, Mazda, Suzuki, Subaru, Daihatsu, and Mitsubishi. The automotive manufacturing sector is significant for Japan's economic vitality, constituting 2.9 per cent of the nation's GDP and 13.9 per cent of its manufacturing GDP.
As per AL Circle's industry-focus report on "Global ALuminium Industry Outlook 2024", the automotive industry remains the primary driver of aluminium demand in Japan, accounting for 43.4 per cent of the total market for this lightweight metal in the first ten months of 2023. The transportation sector consumed 1.36 million tonnes during this period, marking a 9.9 per cent increase from the same period in 2022, as the Japan Aluminium Association reported.
The demand for aluminium in Japan is poised to gradually return in 2024, propelled mainly by the automotive sector. Although market participants are uncertain about the exact timing of this resurgence, the prevailing consensus points to the potential for recovery starting in the year's third quarter. The first quarter of 2024 is expected to remain subdued.
Some of the aluminium casting companies in Japan, like Ryobi Ltd, Ahresty Corporation and Yutaka Die Casting, recently released their financial reports, highlighting significant changes:
Ryobi Limited is a Japanese company known for manufacturing components for the automotive, electronics, and telecommunications sectors. As per the financial data, for the fiscal year 2023, the interim dividend stood at 35 yen per share, while the year-end dividend was set at 45 yen per share, resulting in an annual dividend of 80 yen per share. This marked a significant increase of 35 yen compared to the previous year and 30 yen higher than the initial forecast. The projected annual dividend for the fiscal year 2024 remains at 80 yen per share.
The boost in sales can be attributed to the gradual recovery seen in automotive production both in Japan and overseas, complemented by the weaker yen. This surge in sales has led to the company's highest-ever sales figures. Despite challenges such as rising energy costs and increasing labour expenses, the growth in sales has contributed positively to profits. Additionally, there was an extraordinary loss of 500 million yen due to the impairment of a domestic sales office.
Over the past three fiscal years, die-casting production has experienced steady growth, driven by domestic and overseas automotive production recovery. Furthermore, the depreciation of the yen has positively impacted sales figures for overseas subsidiaries.
Total assets increased by 18.6 billion yen from the end of the previous fiscal year. This rise is attributed to the increase in notes, accounts receivable-trade, and inventories resulting from higher sales. Additionally, a higher valuation of investment securities has contributed to this increase, including an 8.6 billion yen rise due to the effects of foreign exchange fluctuations.
During the first three quarters of the consolidated fiscal year, the Group achieved significant growth in key financial metrics. Net sales reached ¥118,812 million, marking a 13.8% increase compared to the previous year. Operating income stood at ¥1,642 million, a substantial improvement from the operating loss of ¥466 million recorded in the corresponding period last year.
Additionally, recurring income amounted to ¥1,813 million, in contrast to a recurring loss of ¥118 million in the same period of the previous year. Net income attributable to owners of the parent company reached ¥1,255 million, a notable recovery from the net loss attributable to owners of the parent of ¥475 million reported in the first three quarters of the previous year.
Yutaka Die Casting is a prominent aluminium die-casting company in Japan renowned for its diverse array of die-casting machines. The company ensures a comprehensive production capability, ranging from compact 150-ton machines to robust 800-ton machines designed for manufacturing large die-cast products. A core focus for Yutaka Die Casting lies in delivering exceptional output while maintaining competitive pricing. This is achieved through streamlined production processes, minimizing unnecessary product movements, and optimizing production cycles for efficiency.
Furthermore, the company conducts its post-processing operations indoors, utilizing specialized equipment. This includes five die-casting machines, one melting furnace, three shot blasting machines, one two-dimensional coordinate measuring machine, two cranes, one dryer, and more. Yutaka Die Casting serves a diverse clientele, with customers spanning the automotive, electronics, and various other industries, showcasing its versatility and commitment to excellence.
Market anticipations
Market anticipations suggest a gradual uptick in demand for this lightweight metal from the automotive industry throughout 2024. This positive outlook comes from the easing semiconductor and auto-parts shortages that plagued the preceding years, with significant improvements noted throughout 2023. While the automotive sector has seen a notable uptick in sales, other industries continue to face challenges, hinting at enduring difficult market conditions in the foreseeable future.
According to a report from the Japan Automobile Manufacturers Association, automobile production in Japan surged to 7.4 million units from January to October 2023, a significant rise of 1.03 million units compared to the corresponding period in 2022.
Despite expectations for a surge in aluminium demand driven by the automotive sector in 2024, market participants are currently approaching cautiously and pessimistically, uncertain about developments in other industries. Forecasts indicate that the improvement in aluminium demand will likely begin in the second half of 2024, primarily led by the automotive sector. However, subdued expectations persist for the construction and beverage can sectors, projected to maintain a weak demand outlook.
Agreements for the supply of P1020 to Japan during the first quarter of 2024 were settled at a premium of $90 per tonne, down from initial offers at $95 per tonne, reflecting a bearish outlook for the quarter. The first quarter of 2024 is anticipated to be subdued, aligning with the conclusion of Japan's financial year by the end of March. Market participants are likely to reduce their inventory levels during this period.
BEV industry
By 2035, Japan plans to phase out conventional fuel vehicles entirely. In 2022, Battery Electric Vehicle (BEV) sales reached 58,813, marking a twofold increase from the previous year. Despite this growth, BEV sales only represent 1.7 per cent of total new passenger vehicle sales. However, this shift towards electric vehicles (EVs) is expected to open up new business opportunities within the market.
The penetration rates of BEVs vary among different vehicle types, with Standard and Compact cars at 1.4 per cent and Kei cars at 2.2 per cent. Specifically, BEV sales for Standard and Compact cars totalled 31,592, while Kei cars saw 27,221 sales. Nearly half of the sales for Standard and Compact cars are attributed to Hybrid Electric Vehicles (HEVs), indicating the continued strong demand in the Japanese market since introducing the Toyota Prius over two decades ago.
To encourage the adoption of new EVs, the Japanese government provides subsidies for various types of electric vehicles, including BEVs for all vehicle types, Plug-in Hybrid Electric Vehicles (PHEVs), and Fuel Cell Electric Vehicles (FCEVs). As part of the government's plan, an initiative to increase the number of public charging stations from the current 30,000 to 150,000 by 2030, including 30,000 fast chargers, is underway.
In 2022, Japan witnessed the sale of 3,448,272 new passenger vehicles, marking a 6.2 per cent decline from the previous year. This decrease was primarily attributed to supply chain disruptions caused by the COVID-19 pandemic. Japan's passenger vehicle market is segmented into standard, compact, and Kei cars. Kei cars, known as 'light' vehicles and the most miniature highway-legal passenger cars, hold significant popularity, accounting for over one-third of total new passenger vehicle sales. Their popularity stems from their affordability in purchase and maintenance costs and the tax and insurance benefits they offer.
Conclusion
Despite these challenges, the aluminium casting industry in Japan remains a vital part of the country's manufacturing sector, known for its high-quality products, advanced technologies, and contributions to various industries both domestically and internationally.
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