Sep 16 (Bloomberg)--
Mitsubishi Materials Corp., Japan’s third-largest copper producer, will join domestic and Chinese smelters in reducing output amid lower processing fees and short supply of ore and scrap metal.
The Tokyo-based company will likely cut production of the refined metal by 5 percent to 7 percent for six months starting Oct. 1 compared with the same period a year earlier, Kenichi Watase, general manager in the company’s sales department, said in an interview yesterday. He attributed the production drop to scheduled maintenance closures at its two smelters.
Global smelting capacity will expand 14 percent to 20.68 million tons in 2014, while mining capacity will only reach 18.98 million tons, the International Copper Study Group said Sept. 3. Overcapacity and dwindling returns led smelters such as HudBay Minerals Inc. and Xstrata Plc to close operations in Canada since May.
"Apart from the maintenance works, we basically plan to run the two smelters at full capacity as cathode supply is getting tight amid steady demand,” he said.
The company operates the Onahama smelter north of Tokyo, with a capacity of 258,000 tons, and the Naoshima smelter, in western Japan, with 225,000 tons. The company has a 50 percent stake in Onahama. It will close the Onahama smelter for maintenance for 14 days in late October and shut the Naoshima smelter for 18 days in February 2011, Watase said.
Pan Pacific Copper Co., Sumitomo Metal Mining Co. and China’s biggest producer, Jiangxi Copper Co., will expand or maintain output cuts, the companies have said.
Pan Pacific will reduce output by about 13 percent of capacity in the six months after Oct. 1, the company said yesterday. Sumitomo Metal Mining will likely to maintain a 10 percent output cut until at least 2014, it said Aug. 31.
Jiangxi Copper said Aug. 25 that Chinese smelters may cut output as processing fees dropped to a "historical low.”
The cost of turning ore into metal slumped by more than 15 percent to $39 a ton for mid-year supply contracts, Antofagasta said Aug. 24. A fee of $39 a ton and 3.9 cents a pound is the lowest since 1973, according to data compiled by Hirosuke Chihara, a researcher at the Metal Economics Research Institute.
Copper, used in pipes, tubes and wires, has gained 19 percent in the past year. The copper market will face 194,000- ton shortage next year and about 500,000 tons in 2012, Leon Westgate, an analyst at Standard Bank Plc, said Sept. 3.
Ore Grades Fall
Standard Chartered raised its 2011 copper forecast to $8,325 a ton, from $7,900, because of slower-than-expected starts to projects, the bank said Sept. 6. Copper in London traded at $7,630 a ton at 10:04 a.m. in Tokyo.
Copper mining companies including Codelco and Freeport- McMoRan Copper & Gold Inc. have warned that the entire industry will struggle to keep pace with demand because the most metal- rich deposits have been depleted and discoveries are harder to make. Average ore grades fell about 28 percent in the last two decades, according to Deutsche Bank AG.
"China’s demand will continue to increase in coming years, even though its demand growth may slow a bit,” Watase said. "Demand from Malaysia and other Southeast Asian nations will also remain steady.”