Optical Communication, Copper Foil, Refining Demand Improvement

Overview

BofA Securities released a monthly report on the chemicals and metals industry, assessing the prosperity of various sub-sectors by analyzing trade statistics from Japan and Thailand in April 2026, as well as Toyota Motor's production and sales data. The report found that demand for electronic materials (especially optical communication components, copper foil, and glass yarn) and refining products performed strongly, while some chemical products (such as acetate fiber tow) and steel exports faced pressure. At the same time, although Toyota production has recovered, sales growth of related trading companies shows signs of slowing.

Core views

The core views of the report revolve around export data in several key areas: **Strong Demand for Electronic Materials**: The optical communication sector performed outstandingly, with Fujikura's optical connectors and optical cable export value increasing significantly. In addition, Nittobo's glass yarn export volume rose significantly, and Shin-Etsu Chemical's rare earth magnet exports also grew sharply, indicating strong demand related to AI and data centers. **Divergent Performance of Chemical Products**: Denka's acetylene black exports were strong, but Mitsui Chemicals' lens monomers and Daicel's acetate fiber tow exports were weak. Thailand data further confirmed the price pressure on the latter. Tosoh's VCM, PVC, and caustic soda exports declined sharply. **Refining Demand Improving**: Idemitsu Kosan's petroleum product export volume increased substantially, showing improvement in refining demand. In contrast, ENEOS exports remain weak. At the same time, Japan's April clean fuel (gasoline, kerosene, diesel, etc.) import volume rose significantly, also confirming strong domestic demand. **Steel Exports Under Pressure**: Japan's top three flat steel product import volume decreased 19.9% YoY. Export prices for both Nippon Steel and JFE declined significantly, with Nippon Steel's seamless pipes and JFE's non-oriented electrical steel prices dropping significantly, reflecting weakness in the overseas steel market. **Mixed Automotive Production and Sales**: Toyota Motor's April global production increased 2.1% YoY, recovering from previous sluggishness. However, sales data from trading companies closely related to its business (such as Toyota Tsusho, Mitsui & Co., Sumitomo Corp.) showed signs of growth deceleration, especially in emerging markets.

Analysis framework

BofA analysts adopt a bottom-up data-driven approach, centered on high-frequency international trade and production data. They conducted a detailed breakdown of import and export volume and price data for various products published by Japan Customs in April, and combined them with Thailand trade data for cross-validation. For the automotive industry, they directly cited production and sales data officially published by Toyota. Through this detailed sorting of raw data, analysts can quickly capture prosperity changes in different industrial chains, thereby forming short-term judgments on upstream raw materials (such as copper foil, petrochemical products, steel) and midstream manufacturing (such as optical communication, automotive). The advantage of this method lies in its strong timeliness, able to quickly reflect marginal changes in the real economy.

Methodology notes

• Industry/Industrial Analysis FrameworkVolume-Price Breakdown

  Judging industry prosperity by analyzing changes in the 'volume' and 'price' of exports or sales

  This method decomposes the change in total sales into two parts: volume change and price change. For example, if the growth in export value of a product is mainly driven by volume, it usually reflects strong demand; if mainly driven by price increases, it may reflect tight supply. This report precisely identifies prosperity differences in different industries such as optical communication (volume and price rising together) and steel (price decline) by analyzing import and export volume and price data from Japan Customs.

• Cycle and Prosperity FrameworkInventory cycle (Kitchin)

  Using high-frequency trade data as leading or coincident indicators of the inventory cycle

  Monthly import and export data are high-frequency windows for observing corporate production and inventory behavior. A surge in export volume may mean overseas customers are actively restocking, while a large increase in import volume (such as Japan's April clean fuel imports) may reflect warming domestic terminal demand. This report uses these data to judge the short-cycle position of cyclical industries such as chemicals and energy.

• Upstream-Midstream-Downstream Industrial Chain TransmissionUpstream-Midstream-Downstream Industrial Chain Transmission

  Conducting transmission analysis from downstream terminal product demand changes to upstream raw materials

  The report links Toyota Motor's production recovery with trading company sales data, and further deduces upstream steel and chemical product demand. Similarly, strong exports of optical communication components are attributed to AI data center capital expenditures, reflecting the complete industrial chain transmission logic from macro technology trends to micro material orders.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Fujikura (5803 / FKURF)

  Benefits from strong optical communication demand

  Strengths

  Optical connector and optical cable export value increased significantly, directly benefiting from AI data center capital expenditures

  Risks

  Rapid appreciation of the yen, rapid slowdown in smartphone/PC market

• Mitsui Kinzoku (5706 / XZJCF)

  Benefits from copper foil demand growth

  Strengths

  MicroThin foil and VSP foil growth prospects improve

  Risks

  Rapid appreciation of the yen, technological changes leading to reduced copper foil usage

• Idemitsu Kosan (5019 / IDKOF)

  Benefits from refining demand improvement

  Strengths

  Petroleum product exports increased substantially, high shareholder returns support stock price

  Risks

  Operational deterioration of Vietnam Nghi Son Refinery leads to large losses

• Nippon Steel (5401 / NISTF) / JFE Holdings (5411 / JFEEF)

  Affected by decline in steel export prices

  Weaknesses

  Export prices for products such as seamless pipes and non-oriented electrical steel sheets declined significantly

  Risks

  Sharp deterioration of overseas steel market, unexpected surge in decarbonization costs

• Toyota Tsusho (8015 / TYHOF) / Mitsui & Co. (8031 / MITSF) / Sumitomo Corp. (8053 / SSUMF)

  Affected by deceleration of Toyota-related sales growth

  Weaknesses

  Toyota-related business sales show signs of slowing growth

  Risks

  Significant decline in Toyota Motor production, intensified competition from Chinese automakers

Key data

• Toyota Global Production YoY Growth Rate2.1%April 2026, turned from negative to positive, showing production recovery
• Japan Top Three Flat Steel Products Import YoY-19.9%April 2026, reflecting weak domestic demand
• Japan Clean Fuel ImportsSignificantly IncreasedApril 2026, including gasoline, kerosene, diesel, etc.

Impact & implications

The report believes that the current market presents obvious structural characteristics. The electronic material industrial chain (optical communication, high-end copper foil) driven by AI and data center construction, as well as the refining sector, are current highlights, and related companies are expected to benefit. In contrast, traditional chemical products (such as acetate fiber) and the steel industry face pressure from insufficient demand and price competition. For the automotive industry, although leader Toyota's production has recovered, weak sales data from trading companies on its supply chain suggest that the recovery of the overall automotive market may be uneven, with emerging market demand particularly worthy of attention. These findings provide an important basis for investors to select stocks within cyclical sectors.

Risks

• Rapid appreciation of yen exchange rate
• Significant increase in raw material and fuel prices
• Decline in global terminal demand such as construction and automotive
• Changes in China's chemical industry policies (such as environmental regulations in PVC sector)