Zinc output by Mitsui Mining & Smelting Co., Japan’s biggest producer of the refined metal used to galvanize steel, may decline in the next fiscal year as it plans to shut its largest smelter for two months of maintenance.
The Tokyo-based company will close its Hachinohe smelter from March 15 to May 15, Nobuyuki Nakamoto, general manager of the company’s zinc business, said yesterday in an interview. The plant’s output may fall by 10,000 metric tons to about 90,000 tons in the year starting from April 1, he said.
Zinc jumped 50 percent on the London Metal Exchange since June as the global economy recovered from its worst postwar recession. Supplies of the metal in Asia remained tight amid growing demand from China, the biggest user, to build infrastructure and cars. The country’s vehicle sales soared 32 percent in 2010 as stimulus measures and economic growth helped it remain the largest auto market.
“Metal demand in Asia will remain strong following economic expansion in China and Southeast Asian nations and an export-led recovery at home,” Nakamoto said. The company’s annual sale premiums have climbed 20 percent from last year, including shipping and insurance costs, he said.
Zinc will be the best-performing industrial metal this year, climbing as much as 21 percent to $2,800 a ton from $2,308 in London on Dec. 24, according to a Bloomberg survey of more than 100 analysts, traders and investors. The metal for three-month delivery fell 0.6 percent to $2,440 a ton at 2:06 p.m. in Tokyo.
The zinc market will be relatively supported over the next 12 months by resilient emerging-market demand, new demand from physically backed zinc exchange-traded funds as well as a significant slowdown in mine production growth in China, Deutsche Bank AG said in a report on Jan. 11. The bank forecast zinc prices will average $2,475 a ton in 2011.
Morgan Stanley projects zinc will average $1.05 a pound ($2,315 a ton) in 2011, up 7 percent from an earlier estimate, the bank said in a report today.
Still, zinc may fall 10 percent in the coming weeks after a “sharp increase” in stockpiles and as support from commodity index rebalancing ended, Jesper Dannesboe, a strategist at Societe Generale SA in London, said yesterday. Global zinc inventories have gained 14 percent since mid-December to the highest level since at least 1997, he wrote.
The Hachinohe plant in Aomori prefecture, northern Japan, has a capacity of 112,000 tons a year, including prime-western grade, Nakamoto said. “The company’s sales will be unaffected by the maintenance shutdown,” he said.
Production at the company’s other two smelters -- Kamioka in Gifu prefecture and Hikoshima in Yamaguchi prefecture, west of Tokyo -- may continue to run at full capacity, he said. Kamioka has annual capacity of 67,000 tons a year and Hikoshima produces 74,000 tons of special high-grade zinc.
Prime western-grade zinc with minimum purity of 98.5 percent is used mainly for the construction sector, while special high-grade metal with minimum purity of 99.995 percent is used for steel products in vehicles.
Nakamoto projects Japan’s zinc exports will remain little changed at 90,000 tons in 2011. Japan’s export markets include China, Taiwan, Malaysia, Indonesia and the Philippines.
Japan’s consumption may increase by 20,000 tons this year from as much as 520,000 tons last year, while output is expected to rise to about 600,000 tons from an estimated 580,000 tons, he said. The country’s imports will likely remain unchanged at 30,000 tons this year, he said.
Japan exported a record 156,000 tons to make up for slumping domestic sales in 2009 when consumption at home totaled 433,000 tons, the lowest level since 1966, according to data from the Japan Mining Industry Association.