Pan Pacific, Mitsubishi Buy Copper Overseas to Fill Orders After Temblor

Pan Pacific Copper Co., Japan’s biggest smelter, has joined the country’s producers in buying metal from overseas to fill customer orders after the March 11 earthquake and tsunami curbed domestic output.

“It may last until the Hitachi plant resumes operations later this month,” Pan Pacific spokesman Kouichi Shirai said today. The Tokyo-based company, which exports 30 percent to 40 percent of its total output, halted operations at its Hitachi refinery in Ibaraki, northern Japan, after the disaster.

Smelters in China and South Korea will benefit from a pick- up in demand and from climbing processing fees after the 9- magnitude temblor and 23-foot tsunami forced the suspension of output at smelters and refineries operated by Pan Pacific and other producers of copper, zinc and lead in Japan.

“Producers’ purchases of these metals will underpin prices in London,” said Kim Gyung Jung, an analyst at Eugene Investment & Securities Co. in Seoul. “This will continue until they are able to fully resume operations.”

Japan is the fourth-biggest consumer of copper used in pipes, tubes and wires, and the second-largest buyer of copper concentrate after China. The country imported 5.4 million metric tons of copper concentrate in 2010, up from 4.8 million tons the year before, finance ministry data show.

Distress Sales

Charges to treat and refine copper ore jumped after the disaster curbed smelter and refinery capacity, Macquarie Group Ltd. said in a report March 26. Treatment charges increased to $130 a ton from $60 to $70 before the quake, while refining charges gained to 13 cents a pound from 6 to 7 cents, Macquarie said.

Weaker Japanese demand for copper concentrates would mean treatment and refining charges rise “substantially,” Aurubis AG said in a report March 15. “Deliveries must now be redirected via distress sales to other purchasers,” Aurubis said in the report.

Pan Pacific Copper said yesterday that it plans to produce 257,494 tons in the six months started April 1, down 12 percent from 293,669 tons a year earlier. This compared with 264,485 tons in the six months ended March 31. Output may change because of uncertainty over scheduled power blackouts, it said.

Force Majeure

The Hitachi refinery has an annual capacity of 120,000 tons of copper. The company, a joint venture between JX Holdings Inc. (5020) and Mitsui Mining & Smelting Co., is operating its Saganoseki and Tamano smelters at full capacity.

Mitsubishi Materials Corp. (5711), Japan’s third-largest copper producer, said today it aims to resume partial operations in mid-July at its Onahama smelter. On April 5, the company said it’s buying metal from domestic and overseas markets after declaring force majeure on concentrate shipments on March 14. The smelter produces 220,000 tons to 240,000 tons each year.

On April 1, Sumitomo Metal Mining Co., Japan’s second- largest copper smelter, cut output 12 percent to 354,000 tons in the year from April 1, it said. The company, which has copper capacity of 450,000 tons, will shut its Toyo smelter from Sept. 13 to Nov. 11 for maintenance.

Mitsui Mining & Smelting, Dowa Holdings and Toho Zinc Co., Japan’s top three zinc producers, said March 25 they were importing metal from overseas to replace local supplies.

The total zinc capacity affected was 451,200 tons, according to Bloomberg calculations. The affected capacity includes the Hachinohe, Akita and Annaka smelters. Zinc is used to galvanize steel.

Copper for three-month delivery rose 1.1 percent on the London Metal Exchange to $9,710 a ton at 6:02 p.m. Tokyo time, zinc gained 0.4 percent to $2,459.75 and lead was little changed at $2,821. Copper has climbed 5.7 percent, zinc has risen 7.5 percent and lead has jumped 16 percent since March 11.

To contact the reporter on this story: Jae Hur in Tokyo at jhur1@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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