Japan Grapples With Copper Shortage

Copper cathode producers in Japan are trying to trim exports and buy more metal to supplement their own production and to maintain deliveries to their domestic customers, traders and smelter officials said.

Producers in Japan were concerned they might have to cut output due to reduced supplies of their key raw material, copper concentrate, from the giant Grasberg mine in Indonesia, they said.

The mine was damaged by a rock slide last month. Its operator, Freeport McMoRan Copper & Gold Inc , earlier reported a significant portion of its 2004 sales would not take place until the second half of the year.

"We're making every effort to reduce our export portion and to secure the proper allocations for all of our customers," an official in the sales department of a leading Japanese copper smelter said.

"We have heard many requests from Japanese smelters about gathering material to cover the first quarter. For the second quarter we haven't heard anything yet, but maybe from now on we will," a representative of a trading house supplying copper cathode told Reuters.

Traders said Japanese smelters had bought spot cargoes of copper cathode for January shipment at premiums of between $140 and $150 a metric ton over the London Metal Exchange cash settlement price, delivered to main Japanese ports.

Chile's Codelco, the world's largest copper producer, raised its premium for 2004 term shipments to Japan to $70 a metric ton CIF over LME for main Japanese ports, from $47 last year.

Japanese copper smelters are also considering extending copper concentrate purchases from alternative sources in order to maintain production despite the shortfall from Freeport.

Traders said Japanese smelters had already agreed to buy more spot copper concentrate from Chile during the first quarter and were aiming to secure more cargoes for delivery from April.

Some orders have been placed with BHP Billiton Plc/Ltd's huge Escondida mine in Chile, which restarted full production from the beginning of the year, a Tokyo-based trader said.

"Japanese smelters and consumers have said they are pretty much covered, but covered until when?" another trader said. "Up to March, the market will remain really tight but this could extend to April or into May."

An official for Pan Pacific Copper Co Ltd, a joint venture between Nippon Mining Holdings Group and Mitsui Mining & Smelting Co Ltd , said the company had enough copper concentrate to cover the first quarter of the year but was considering its position for the second quarter. Reuters