Japan's Daiki seeks cheaper production sites abroad


* Daiki's Japanese production down 3 percent yr-o-yr

* Indonesia sees motorcycles boom, cars are next

* Oversupply will put pressure on prices for aluminium alloys

By Silvia Antonioli

LONDON, May 31 (Reuters) - Japan's Daiki Aluminum is seeking cheaper production sites overseas following local car makers already forced abroad by an increasingly strong yen, shrinking domestic output and competition from China and South East Asia.

The country's largest aluminium alloy producer, which produces about 85 percent of its ingots for motorcycle and car production, already has a presence in China and southeast Asia.

"Our strategy is to move production overseas to Thailand and Indonesia and China among other countries," the company's director of purchasing, Shigenori Hayashi, told Reuters late on Wednesday on the sidelines of the BIR recycling conference.

"Daiki is doing more investment overseas following customers who are going to places like China or southeast Asian countries, especially for production of compact cars which is the most cost-competitive sector in the automotive business."

The most promising country among these is Indonesia, according to the executive, due to its growing population and strong GDP growth.

"Right now motorcycles are booming in Indonesia and a car boom will follow," Hayashi said.

He added that Thailand was a very important country for its company too because many Japanese and European automotive companies have invested in the area and many auto parts suppliers operate there too.

Last week, Toyota Motor Corp said it would roll out eight new compact car models to be produced in local markets such as India, Brazil and China. The country's top automaker said it would aim to procure 100 percent of the cars' components locally to lower its costs - a move that would require a stronger research and development function in those markets.

It added production capacity in emerging markets will rise to 3.1 million vehicles a year by 2013, from 2.38 million in 2010, matching the level in Japan.

Earlier this week, Nissan Motor Co, Japan's No.2 automaker, said it will start making its Infiniti cars at a 2-billion yuan ($315 million) plant in China from 2014.

Daiki's aluminium production is about 3 percent lower this year compared with last at about 20,000 tonnes a month, even though the government introduced incentives for car buyers this year.

The company is also feeling the pinch as aggressive importers gain market share in Japan.

"Imported aluminium alloy is cheaper and more competitive. If we cannot maintain our current capacity in Japan we will have to downsize a bit," Hayashi said. (Editing by Mike Nesbit)



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