Despite being the fifth largest primary aluminium demand country, Japan no longer possesses any domestic production capacity. As such, the country is dependent on imports to meet its requirements.
Total aluminium imports into
Japan span across a range of products, primarily as unwrought (both alloyed and
unalloyed) and wrought materials including flat-rolled products and waste and
scrap metal.
Short to Medium Term Demand
AME forecasts Japan’s primary
aluminium demand will increase to 2.1Mt over 2022, up 2% from 2021. This remains
below the country’s primary aluminium demand prior to the 2008-09 GFC. Japanese
aluminium consumption in 2021 exhibited a major rebound from more recent pandemic
lows but has since been subdued due to lower demand from the automotive sector.

The global supply chain
crunch, both through and lingering after the pandemic, as well as a microchip
shortage, has seen Japanese automakers and parts makers—major consumers in the
country—cut production.
This is a situation which is still yet to fully recover
and is now being compounded by current events in Europe. Further, the situation
is exacerbated by China’s Covid-containment measures which is also contributing
to prolonged supply disruptions.
Additional growth of 1.8% is
expected in 2023, with some upside present which is dependent largely on the
recovery of Japan’s vehicle manufacturing volumes.
Japan is the largest demand
centre in Asia outside China, the largest importer of primary aluminium by
volume, and is a determinant of the region’s physical metal premium. The Main
Japanese Ports (MJP) premium has been in recent retreat with the December
Quarter set at US$99/t, down 33% from the September Quarter, reflecting the prolonged
weak market fundamentals in Japan, namely in the automotive sector.
The automotive manufacturing
industry represents the largest demand segment, accounting for ~40% of the
country’s total demand. Initial fallout from the Russia-Ukraine conflict saw a
rush for Russian aluminium supply by Japanese buyers. Continued flow of
material, with Russian metals remaining unsanctioned, has seen the rise in port
inventories suppressing premiums.
In the medium-term, Japan’s
primary aluminium consumption is forecast to grow at a relatively subdued CAGR
of 1.1% to reach 2.2Mt in 2027. A fundamental shift in Japan’s import and
export trade in aluminium products weighs on the country’s aluminium demand
growth.
Domestic product makers have been actively investing in overseas
ventures to access lower production costs and growth in overseas demand. This
has seen an increase in imports of finished and semi-finished aluminium
products, gradually reducing the country’s demand for primary material.

Long Term Demand
Long term growth of
primary aluminium demand in Japan is expected to remain relatively subdued,
rising with a CAGR of 1.0% to reach 2.5t by 2040. Upside potential does exist
should the country’s automotive and wider manufacturing sector succeed in transitioning
to grow the supply components and vehicles required in a new-energy world, or
further engage through advanced manufacturing required to support the
transition.
The re-homing of offshore production capacity will be required to
provide a significant boost to aluminium demand growth in the long term. This
will cut down the number of manufacturers exposed to the sovereign risks of
operating in other jurisdictions.
Japan’s Energy Transition
Japan has a net-zero target
of 2050 and recently increased its interim emissions reduction target to 46%
below a 2013 baseline—while making efforts to reach 50%—which is up from a
previous target of 26%. Following the energy sector, the largest source of
Japan’s CO2 emissions is its manufacturing industry, where most aluminium end
up. As such, emissions reduction could affect the consumption of aluminium.
According to Japan’s Ministry
of the Environment, the country emitted 1,150Mt of CO2 equivalent in its 20/21
financial year, a decline of 5.1%. This represented the seventh year in a row
of decline and was driven by both reduced energy consumption—assisted by the
COVID-19 pandemic—and lower emissions from the power generation sector due to
increasing share of low-carbon electricity. This is due to the wider usage of
renewables alongside the resumption of nuclear power plants.
In October 2021, Japan
approved a Basic Energy Plan to help meet its revised 2030 target. The plan
includes a revised energy mix target of 36-38% renewable electricity, 20-22%
nuclear, 22% gas and 19% coal. Some concerns have been raised over the
continued presence of coal in the energy mix and how this will impact the
ability of Japan to reach its stated targets.
The Japan Aluminium
Association (JAA) has outlined a Vision 2050 for how Japan’s aluminium sector
can contribute to the country’s wide net-zero targets. Its key points include
increasing the recycling rate of aluminium wrought products from the present
~10% to 50%, enabled by ongoing recycling innovation, and looking at potential
energy savings in manufacturing to reduce CO2 emissions from the sector by 78%.
This includes consideration of improved CO2 intensity of primary aluminium
production—this will only be achieved through sourcing from green sources,
given Japan has no domestic production capacity.
Focussed on the Automotives
Japan has a potentially
significant role to play in the energy transition. It is home to several major
automotive manufacturers as well as significant manufacturers in the renewable
energy sector. The uptake of electric vehicles is expected to increase
demand for aluminium from the auto-sector due to its potential to improve
battery range via its lightweight property.

Compared to their European
counterparts, Japanese car makers have been less forthcoming with firm
commitments to phase out internal combustion engines. Mazda, Mitsubishi and
Nissan have not set target dates for PHEVs-BEVs only or BEVs only production.
Honda has committed to BEV only in Europe—a relatively small market for the
company—from 2022 and in the United States not until 2040.
Toyota, one of the
world’s largest manufacturers, plans to produce 8 million electrified vehicles
by 2030 and have 73 electrified models by 2025, of which 15 are BEV’s. They
have also committed to stop producing ICU’s by 2040. Given their long-term
experience with the Prius hybrid, the slow uptake is slightly surprising.
The
company has been pursuing hydrogen fuel cells which may have led to it being
slightly late off the mark with electrification. Nissan has indicated all its
new cars will be electrified in the key markets of Japan, China, the US and
Europe by the early 2030s.
Despite a lack of firm targets, growing demand for
EV’s from the dominant market, China, as well as Europe, is expected to force
manufacturer’s hands into more quickly shifting to electric. All major Japanese
automotive manufacturers have a 2050 target for reaching carbon neutrality.