Copper Down Cycle Drags on Japan Traders
The copper down cycle has taken a big bite out of the profits of Japan’s trading companies.
This morning, Mitsubishi Corp., Japan’s biggest trading house, announced ¥430 billion (US$3.8 billion) in write downs on a list of commodities assets, starting with AngloAmerican Sur, a Chilean copper mining and smelting company. Citing the downturn in the copper market and the extended timeframe needed to develop mining projects, Mitsubishi sets the loss impairment at ¥280 billion – 65% of the total write down.
On Wednesday, Mitsui & Co. announced ¥260 billion (US$2.3 billion) in write-downs for the first annual loss in its 69-year modern history. The write-downs cover losses from oil, gas and coal projects, a Brazilian mining company, and – the biggest single hit at ¥115 billion (US$1 billion) – Chilean copper mining projects.
Mitsui cites gloomier long-term price outlooks in calculating impairment losses from its investments in the AngloAmerican Sur and Caserones projects.
The toll exacted by the down cycle in commodities such as copper is not limited to producing countries such as Chile and Peru, whose economies depend heavily on exports of copper ore and concentrates. Japan is also feeling the pain, as an investor in mining projects … and as a manufacturer further up the production value chain.
Japan is a top importer of copper ore. According to Datamyne’s global data, Japan ranks second among copper ore importers – accounting for about 19% of copper import trade. Top-ranked China, accounts for 40%.
Japan ranks fourth among exporters of copper cathodes, behind China, the US and Germany, accounting for 4% of export trade in this refined product that is the primary feedstock for copper rod.
As our Japanese trade data indicates [see the graphs], even as the price of the input has fallen, the output price fall has been steeper. By year-end 2015, Japan’s copper cathode export volumes were slowing, as the price they fetched in the global marketplace dropped markedly.
To see more data on trade in copper, download our free report, Quick Look @ Copper Trade 2015, covering Chile’s and Peru’s copper exports, and the imports of China, EU and US, as well as both sides of Japan’s copper trade.
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Date posted: March 24, 2016