May 25 (Bloomberg) -- Sumitomo Metal Mining Co., Japan's second-largest copper smelter, may maintain production cuts of 10 percent in the year from April 1, 2011, because of lower processing fees and a well-supplied domestic market.
"It's meaningless to increase output under these conditions," Mikinobu Ogata, executive officer in the nonferrous division, said in an interview in Kyoto yesterday. Current fees "are below cost," he said.
Payments to smelters slumped 38 percent this year as they competed to process scarce raw material. China's expansion of capacity caused an ore shortage that will persist through at least 2014, according to CRU Group. China and India, the world's fastest-growing major economies, are driving demand for copper to build homes, cars and power grids.
Sumitomo plans to produce 404,000 metric tons of copper cathodes this fiscal year, 10 percent below the 450,000 ton capacity of its Toyo smelter.
Domestic demand has recovered to 80 percent of the peak before Lehman Brothers Holdings Inc. collapsed, Ogata said. "The domestic market is already saturated," he said.
The company is operating at the optimum rate to meet commitments to domestic clients, he said. Sumitomo aims to increase copper output from its own mining interests to 300,000 tons by 2020 from 180,000 tons, Nobumasa Kemori, president of the company, said Feb. 15.