Japan's two major copper smelters said they plan to boost production in the first half of the financial year that began but they remained wary about the demand outlook due to uncertainty over Japan's economy.
Consumption of copper, used in a wide range of goods including utensils, construction materials and computer chips, is often seen as a gauge of economic activity.
Sumitomo Metal Mining Co Ltd, Japan's second-largest copper smelter, said it plans to produce 404,000 tons of copper in the year to March 2011, up 0.7 percent from planned output of 401,000 tons in fiscal 2009/10.
It plans to produce 202,000 tons of copper in April-September, up 3 percent from 195,195 tons in the same period last year, and another 202,000 tons in October-March.
“The forecast is based on our demand assessment and on what is the most cost effective and most profitable level under current conditions,” a Sumitomo Metal Mining spokesman said. “We expect a similar demand situation this year to last year.”
Japan's third-largest copper smelter Mitsubishi Materials Corp said it plans to produce 157,512 tons of copper in April-September, up 7.5% from 146,472 tons a year earlier.
Furukawa Co Ltd also said it plans to produce 46,350 tons of copper in April-September, up 14 percent from a year earlier.
Copper production by most Japanese smelters had been about 10% less than their capacity since early 2009 as the worst economic downturn in decades forced manufacturers to reduce production and led to a sharp decline in metals consumption.
Mitsubishi Materials became the first major Japanese firm to reverse cuts, announcing in August last year that it had returned to full production.
“Demand is coming back but not strong enough, with lingering uncertainties,” said a Mitsubishi Materials spokesman. “The forecast is an appropriate level under the current conditions but not near our peak production,” he said.
Japan's copper output has been slow to pick up, weighed down by strong deflationary pressure and sluggish demand by the construction sector, a major consumer of the metal.
Japanese business morale improved in March for the fourth consecutive quarter, the Bank of Japan's tankan survey showed on Thursday, but the economic recovery could struggle to pick up pace as companies were cautious about spending due to excess capacity.
“While the tankan confirms the trend of economic recovery, companies are still faced with excess labor and inventories, leading them to project a conservative outlook for capital spending,” said Naomi Hasegawa, a senior fixed-income strategist at Mitsubishi UFJ Securities.
Japan's refined copper exports fell 18 percent in February from a year earlier to 53,618 tons, with China the destination for nearly two-thirds of them, Ministry of Finance data showed on Tuesday.
Domestic investment and consumption in China, the largest destination for Japanese copper exports, are expected to remain robust.
HSBC's China Purchasing Managers' Index (PMI) rose to 57.0 from a three-month low of 55.8 in February as output, new orders and job creation all picked up. For the first quarter as a whole, manufacturing output expanded at the briskest clip in the survey's six-year history. (Reuters)