Mitsubishi Materials Corp., Japan’s third-largest copper smelter, may abandon a plan to return to full production in its fiscal second half as the nation recovers slowly from its worst postwar recession.
“Unless domestic demand rebounds further from the current level, we may not be able to return production to normal volumes in October,” Kenichi Watase, general manager at Tokyo-based Mitsubishi Materials’ sales department, said yesterday. Output in the six months to Sept. 30 would be down about 10 percent from capacity, he said in an interview.
Japan’s economy is “in a difficult situation,” the Cabinet Office said in a monthly report on July 13, even as the recession moderates. Prime Minister Taro Aso has pledged 25 trillion yen ($263 billion) to drive a recovery. Mitsubishi Materials and rivals including Pan Pacific Copper Co., Japan’s largest copper smelter, cut output as the downturn slashed demand for the metal used in wires and tubes.
“Japanese metal producers may have difficulty ending output cuts as the economy may resume a contraction late this year or early next year on fading effects of the government’s stimulus measures,” said Kazuhiko Saito, chief analyst at Tokyo-based commodity broker Fujitomo Co.
Copper for delivery in three months on the London Metal Exchange gained 0.5 percent to $5,630 a metric ton at 5:16 p.m. in Tokyo. Reduced output and record imports by China, the biggest consumer, helped the metal gain 83 percent this year.
Mitsubishi Materials lost 0.4 percent to 269 yen on the Tokyo Stock Exchange.
The company in April forecast domestic first-half output of 145,554 tons, down from 160,410 tons a year earlier. Mitsubishi Materials may fall short of the plan by 300 tons to 400 tons, even as it is currently raising output at its two domestic plants to near capacity to offset disruptions caused by accidents, Watase said.
The company hasn’t decided on production levels for October onward, he said.
“It is uncertain whether demand will keep rising in the second half,” he said. A recovery in demand from carmakers was not large enough to offset losses in other industries, and demand from the construction sector, the largest user of the metal in Japan, remains weak, he added.
Japan’s total copper shipments rose after hitting bottom by March, led by rising sales of hybrid cars in Japan and exports to China, where the government’s 4-trillion-yuan ($586 billion) stimulus boosted consumption, he said.
Mitsubishi Materials expects to sell about 70 percent of its copper in Japan and the rest overseas in the six months to Sept. 30, he said.
First-half output may fall short of the plan after Onahama Smelting and Refining Co. reduced concentrate processing by 30 percent because of a fire in March. Mitsubishi Materials owns 50 percent of the Onahama smelter, north of Tokyo, which has capacity of 258,000 tons a year.
The company halted operation of its 220,000-ton Naoshima smelter in western Japan for 10 days in June because of “troubles” at the plant, Watase said. About 800 tons of production is lost for each one-day of suspension, he added.
Copper production at the Gresik smelter in Indonesia, owned 60.5 percent by in Mitsubishi Materials, increased to 140,000 tons in the six months ended June 30 from 113,000 tons in the same period last year, as Southeast Asian demand was less affected by the global economic slump, Watase said.
More than half the metal produced is sold in Indonesia, with the rest shipped to countries such as Malaysia, Thailand and Vietnam, he said.
Capacity will rise to 300,000 tons a year in September from 285,000 tons after completion of an expansion, Watase said.
“It will depend on market conditions whether we will run the smelter at full capacity or not,” he said. Mitsubishi Materials takes more than 70 percent of the metal produced at the PT Smelting operation, which is also owned 25 percent by Freeport-MacMoran Copper & Gold Inc., 9.5 percent by Mitsubishi Corp. and 5 percent by Nippon Mining Holdings Inc.
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