Japan’s aluminium scrap export to S. Korea may slow down on Hyundai procurement probe

Aluminium scrap export from Japan to South Korea declined in March 2017. The South East Asian country has reportedly turned to Zorba scrap and the US twitch as they have been found to be more economical. March 2017 aluminium scrap export from Japan to South Korea stood at 1,764 tonnes, down from 2,953 tonnes in November 2016. The export is estimated to shrink further as South Korean prosecutors have started an investigation on the aluminium procurement practices of Hyundai Motor Group and its aluminium alloy suppliers, who source a lion's share of their requirement from Japan, a company source reported to S&P Global Platts last week.

{newsStudioGallery}

Japan is a major exporter of aluminium scrap and automotive grade aluminium alloy to the entire of South East Asia. The country shipped 197751 tonnes of aluminium scrap globally in 2016. The total export was valued at US$350 million. This is in stark comparison with the aluminium scrap export in 2015, when the volume stood at 108946 tonnes only and value was estimated at US$129 million. This year-on-year increase over the last two fiscals is expected to slow down in 2017.

This year, Japan’s global aluminium scrap export is estimated to remain flat at 198877 tonnes and estimated value of export is likely to reach US$411 million.

In fourth quarter of fiscal 2017 that is during January-March this year, the country exported 47842.5 tonnes of scrap aluminium down 8.11 per cent from the previous quarter.  

Industry reports have it that the Hyundai probe can lead to two market conditions: a. Japanese scrap aluminium prices may decline as a knee jerk effect b. Japan may have to target new overseas markets to sell its aluminium scrap to as South Korea will move further away from Japanese scrap.

{googleAdsense}

Japan has been exporting a major chunk of its aluminium scrap to South Korea. The country’s secondary aluminium smelters was consuming 25,000-30,000 tonnes of 6063 aluminium extrusion scrap on an average in a month and exporting around 1,000-3,000 tonnes to South Korea, showed Japan Aluminium Alloy Refiners Association data.

"The Japanese smelters may be receiving more offers as exporters need to cover the lost South Korean demand quickly," said a Japanese trader. However, which direction the market decides move - will depend on the investigation findings.