Pan Pacific Copper Says May Keep Production Cut on Lower Fees

Feb. 26 (Bloomberg) -- Pan Pacific Copper Co., Japan's biggest producer of the metal, may maintain output cuts of 5 percent to 7 percent in the next fiscal year after processing fees fell, a company executive said.

"We're considering keeping the output cuts because the raw material processing fees are below cost," Yoshihiro Nishiyama, director and executive officer at the Tokyo-based company's marketing department, said in an interview today. Pan Pacific may produce 570,000 metric tons to 580,000 tons in the year starting April 1, he said.

BHP Billiton Ltd., the world's largest mining company, and Freeport-McMoRan Copper & Gold Inc. won a 38 percent cut in 2010 processing fees from copper smelters as raw material supplies tightened after China expanded smelting capacity.

Current production is below Pan Pacific's annual capacity of 620,000 tons, Nishiyama said. The company had targeted production of 584,800 tons this year, he said. The company is 66 percent owned by Nippon Mining & Metals Co., a unit of Nippon Mining Holdings Inc., and 34 percent by Mitsui Mining & Smelting Co.

Japan's total production of the metal, used in pipes, tubes and wires, may be 1.56 million tons to 1.57 million tons in the next year, little changed from this year, he said.

Domestic demand for copper will likely increase to 940,000 tons to 950,000 tons in the next fiscal year from 920,000 to 930,000 tons this year as consumption recovers slowly, Nishiyama said. This compares with 1.18 million tons the previous year.

Export Fall

Exports may decline to 500,000 tons to 550,000 tons in the next fiscal year from an estimated 580,000 tons this year, he said. This compares with 520,000 tons in the previous year.

"Demand from the auto sector has recovered to 90 percent of normal levels, while that from the construction industry remains subdued and Toyota Motor Corp.'s recalls have made the business outlook uncertain in the coming year," he said.

The world's largest automaker has recalled about 8 million vehicles globally to fix or reshape gas pedals that may stick or be trapped by floor mats after reports of unintended acceleration.

Japan's output of copper and copper-alloy fabricated products, including sheets and tubes, rose in January for a third straight month as the country's economy recovered from its worst post-war recession.

"We've not seen any significant slowdown in China's demand despite the country's recent curb" on lending, he said. "I am confident on China's demand growth for copper."

China's private car ownership jumped 34 percent in 2009 from a year earlier to 26 million units, the official Xinhua News Agency said, citing data from the National Bureau of Statistics.