TOKYO Some of
Japans nonferrous metal producers have warned that they
will face a struggle to remain profitable if power companies go
ahead with planned price increases.
Tokyo Electric Power Co. Inc.
(Tepco) plans to raise prices sharply starting April 1 in a
move that the Japan Mining Industry Association fears will be
followed by other electricity companies, raising production
costs for metals by a significant amount.
"If other power companies follow
Tokyo Electrics hike, it will be difficult to maintain
our businesses," association chairman Masao Yamada said. Zinc,
ferronickel and titanium smelters are at particular risk, given
that their power consumption is much higher than that of other
Japans nonferrous metal
producers consume up to 5 billion kilowatt hours per year, and
the power increases could add some 12 billion yen ($128.7
million) per year to production costs, according to the
At least two other regional
electric utilitiesKansai Electric Power Co. Inc. and
Kyushu Electric Power Co. Inc.have said they plan to
increase their rates by around 14 percent in April.
"It is very difficult to
increase (our product) prices, which means that the main effort
has to be on reducing operating costs. But there is only so
much we can reduce our costs by, so we are very worried about
the higher electricity prices, especially for our ferronickel
operations, which consume a large amount of power," said an
executive at Sumitomo Metal Mining Co. Ltd., which operates a
ferronickel smelter in Kyushu in western Japan.
He pointed out, however, that
the companys other main smelting operations in Shikoku,
in the western part of the country, have their own power plant,
which is used to supply cheap electricity to the entire
groups operations in the area. "That gives us a big
advantage over our competitors, as the impact on higher
electricity prices for us there has been minimal," he said.
In contrast, many zinc smelters
were forced to shut down or heavily reduce their operating
rates last summer in an attempt to mitigate the price hikes
imposed by Tepco.
"For other companies there is
little they can do, as it is so expensive and difficult to
build power plants," he said.
Most of Japans nuclear
reactors remain shut down after the Fukushima disaster in March
2011, forcing utilities to turn to far more expensive fossil
The Japan Iron and Steel Federation estimates that the power
price increases could add some 13 billion yen ($139.4 million)
in costs beyond the 20 billion yen already added by
Tepcos hike last year.
A version of this article was first published by AMM sister
publication Metal Bulletin.