Japan’s Metal Smelters See 12 Billion Yen Cost Rise on Power

Base-metal producers in Japan, the world’s third-largest economy, will face a 12 billion yen ($135 million) cost gain if power companies follow a rate increase by Tokyo Electric Power Co. (5411), according to an industry group.

Smelters of non-ferrous metals such as copper, nickel and zinc purchase a total of 5 billion kilowatt-hours each year, Masao Yamada, chairman of the Japan Mining Industry Association, told reporters today. Tokyo Electric raised corporate electricity rates by 16.7 percent in April before cutting them to 14.9 percent in September.

The shuttering of most of Japan’s nuclear reactors after the Fukushima nuclear disaster in March 2011 has forced utilities to turn to alternative energy sources and pay a higher price for fuel. Kyushu Electric Power Co., which supplies Japan’s southern island, plans to increase prices by 14 percent for corporate customers from April 2013.

“If other power companies follow Tokyo Electric’s hike, it will be difficult to run our business,” said Yamada, also president of Dowa Holdings Co. (5714)

Together with the nation’s eight other industry groups including steelmakers, the association urged the trade ministry to take measures, including subsidies and the resumption of idled nuclear power plants, to alleviate any cost increase, according to a statement from the groups.

Zinc smelters consume four times the amount of electricity that copper producers use, Yamada said. Smelters affected would include Pan Pacific Copper Co., Sumitomo Metal Mining Co., Mitsubishi Materials Corp. (5711), Mitsui Mining & Smelting Co. and Toho Zinc Co.

Japan’s steel industry faces an increase in costs of as much as 100 billion yen annually due to rate increases, which will hurt smaller mills that operate electric furnaces the most, Hiroshi Tomono, chairman of the Japan Iron and Steel Federation, said Nov. 21.

To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net

To contact the editor responsible for this story: Brett Miller at bmiller30@bloomberg.net

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