Sumitomo cuts refined copper forecast on Toyo smelter issues

Sumitomo Metal Mining (TYO: 5713) has lowered its refined copper production forecast for a second time this fiscal year, after equipment issues reduced operating rates at its Toyo smelter and refinery in Japan.

The company now plans to produce 400,800 tonnes of electrolytic copper in the year ending March 31, down 27,400 tonnes from its August plan and 46,100 tonnes below the 446,900 tonnes it planned in May, according to slides for its Nov. 10 earnings call. It said operating rates are expected to decline because of the equipment issues at Toyo, which sits between the cities of Saijo and Niihama in Ehime prefecture. The August slides, which carried the first, 18,700-tonne reduction, did not attribute it to Toyo.

The problem was already visible in first-half output. Electrolytic copper production fell to 196,400 tonnes in the six months to September from 215,000 tonnes a year earlier, and the company cited lower operating rates at Toyo for the half. Second-quarter output was 89,800 tonnes, against 106,600 tonnes in the first quarter and 105,600 tonnes a year earlier. The new plan implies 204,400 tonnes in the second half, after 412,600 tonnes last fiscal year.

Sumitomo cut its refined copper sales forecast by less, to 419,600 tonnes from 424,400 tonnes, leaving planned sales 18,800 tonnes above planned production. The slides do not say how the difference will be covered. Shanghai Metals Market said lower rates at Toyo could tighten near-term refined copper supply in Japan, and that the effect on Asian trade flows will depend on how quickly the smelter returns to normal and whether Sumitomo draws on inventories or adjusts export schedules.

Treatment and refining charges (TC/RCs), the fees miners pay smelters to turn concentrate into refined metal, also moved against Sumitomo in the first half. Its concentrate purchase terms deteriorated, the company said, but by-product prices and sales premiums above last year's levels still lifted copper smelting profit. For the full year it now expects lower copper smelting profit excluding inventory valuation. Its forecast for copper smelting gross profit fell by ¥39.8 billion from August, of which the company attributed ¥1.3 billion to lower volumes and ¥19.5 billion to inventory valuation.

Yasuhiro Miyake, a director and the executive officer in charge of financial strategy, declined to give a forecast for 2027 TC/RCs but said difficult market conditions were likely to persist, Reuters reported. In May, he told Reuters the company expected double-digit charges for 2026, below the 2025 Japanese benchmark of $25 a tonne and 2.5 cents a pound, and that it had no plans to cut primary metal production despite weaker terms.

In China, smelters have been processing imported concentrate at negative treatment charges, with Shanghai Metals Market's weekly imported concentrate index at minus $247.35 a dry tonne on Nov. 6.

Toyo is operating at reduced capacity because of a technical issue that is expected to be resolved in the current quarter, Miyake said, according to Reuters.

"We will take measures to restore the equipment and work to minimize the impact on customers," Sumitomo said in the slides.

(With files from Reuters)