Wed, Nov 11, 2015 - Page 15 News List

Low demand from China hurts Japan’s metals producers


Japanese metals producers continue to cut profit forecasts, with Sumitomo Metal Mining Co and Mitsubishi Materials Corp the latest to warn of the impact of China’s slowdown.

Sumitomo Metal slashed its operating profit forecast by 37 percent to ¥74 billion (US$601 million) for the year to March 31, after posting a 6.9 percent decline in the second half to ¥51.5 billion.

It cited a significant fall in prices for the cut and warned that capital expenditure for the year would fall to ¥77.5 billion from ¥85.1 billion, according to a statement to the Tokyo Stock Exchange.

Mitsubishi Materials’ reduction in its forecast was less pronounced, down 2.4 percent to ¥83 billion, after a 6.3 percent increase in second-half operating profit to ¥36.2 billion, according to its own statement. The company is less reliant on metals for earnings.

The companies’ outlooks underscore the challenges facing metals producers as demand slows in China, the world’s biggest consumer.

Mitsui Mining & Smelting Co, and top steel companies Nippon Steel & Sumitomo Metal Corp and JFE Holdings Inc, have been among the companies to cut their full-year earnings forecasts in recent weeks.

At a briefing in Tokyo, Mitsubishi Materials’ managing director Nobuo Shibano said that copper prices, which are trading at six-year lows, might have bottomed after cuts to supply.

“We would likely see the impact of output cuts from copper mines,” he said. “We don’t expect that the supply-demand balance would further weaken.”

Mitsubishi Materials’ metals division produces mostly copper, and accounts for half of the company’s sales, while cement, nuclear energy and engineering services are among its other major businesses.

Sumitomo Metal Mining, which produces copper, nickel and gold, derives more than 70 percent of its revenue from metals.

Sumitomo also said its outlook has been clouded by a delay in commercial production at its Sierra Gorda copper mine.

In terms of sales, Mitsubishi Materials is Japan’s second biggest nonferrous metals company and Sumitomo its third. The top producer is JX Holdings Inc, whose main business is oil refining.

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