Japanese Aluminum Smelters' Merger to Fuel Competition among Silicon Suppliers

With Japan's second largest secondary aluminum alloy smelter Asahi Seiren taking over another smelter Summit Showa Arumi effective July this year, silicon suppliers expect competition to bag large orders from the merged entity to heat up, market sources said Thursday.

 

"You have a big customer buying a large sum. The customer has grown double in size, so suppliers would be excited [as they will be getting bigger orders]," said one Tokyo-based trader.

 

"You have one strong player [with stronger financial base] as a result of the merger and that is good for the silicon industry," said another Tokyo-based trader.

 

Japan has roughly 20 secondary aluminum alloy smelters, most of them buying 40-300 mt/month of silicon in small lots. 

 

But Asahi Seiren and Summit Showa consume a larger volume of around 1,000-1,500 mt/month of 553, 441 and 3303-grade silicon metal. Once the takeover has been completed, the demand for large lots of over 2,000 mt is expected to increase from the merged entity.

 

While total demand from the two companies is expected to remain unchanged as there is no major line closure announcements yet, procurement practices could change after the two re-organize their operations, traders said. 

 

A Summit Showa official maintained that the two companies will remain independent, but traders said that was unlikely in the long run as it would not fulfill the purpose of the merger.

 

Asahi Seiren took over Summit Showa as the latter's stakeholders felt this was better for the company's future, they said. As such, production and procurement would need to be reviewed once the merger is finalized in July, the traders said.

 

Meanwhile, Asahi Seiren's procurement official was not available for comments Thursday, but sources said the company has been buying through quarterly buy tenders as well as from the spot market.

 

Asahi Seiren consumes a total of 1,000-1,500 mt/month of 553, 441 and 3303-grade silicon metal for producing 10,000-12,000 mt/month of secondary aluminum alloys.

 

Summit Showa's total consumption is slightly less than Asahi Seiren's for producing 10,000 mt/month of alloy, market sources said, but exact consumption figures were not immediately available. Summit Showa buys 553, 441, 3303 and 2202-grade silicon to produce aluminum alloys, said traders.