Japan aluminum sector worries over energy policy impact on end-users

Japan Prime Minister Naoto Kan's statement late Wednesday that the country should move towards a nuclear-free energy policy has sparked concerns in the aluminum rolling mill sector that end-users will be negatively impacted, industry sources said Thursday.

Nuclear power accounts for 30% of Japan's total power supply source, according to the Japan Atomic Power Industrial Forum. "Japanese manufacturers will run away from Japan, which will affect the metal industries," said a former senior official at a Tokyo-headquartered aluminum rolling mill. The mill produces aluminum sheets and extrusion used for automobiles, beverage cans and other industrial machinery. "There are possibilities of power rate hikes, and the premier's policy [plan] raises questions if there will be enough power supply," the former official, who declined to be named, said.

He added that the Japanese aluminum rolling mill sector mainly uses gas and fuel oil to directly generate energy at its plants and only 20-30% is from electricity supplied by public utilities, derived from oil and gas-fired plants and nuclear power plants. "But, our customers will still be affected, which will impact us," he said. A Tokyo trading house official, who supplies aluminum ingot to the rolling mills, said the possible power hikes will squeeze profit margins for the mills nevertheless. Iwaki Diecast, an aluminum automotive components maker in the Miyagi prefecture in northeast Japan, has deployed a solar-power system at its plant in 2009, in a bid to move to cleaner energy sources. But the cost of solar power generation is high and it will take decades to absorb initial deployment costs, said Hiroto Yokoyama, the company spokesman. Silicon solar power system at the Sakamoto diecasting plant generates 250 kW of power, which is roughly one third of the 870 kW required for running the plant. The plant produces 1,000-2,000 mt/year of aluminum automotive components to supply to Toyota Motor and other automakers. The solar power cost is Yen 70,000 ($875)/kW, Yokoyama said. "We can recover costs in 30 years. Will the system run for 30 years, is the question," Yokoyama said. --Mayumi Watanabe, mayumi_watanabe@platts.com