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Sumitomo Corp. plans to boost zinc production at its mine in Bolivia by 4 percent this year as the operation runs at full capacity, an executive said.

The company will raise output to 256,000 metric tons on a refined metal basis in 2010 from 246,000 tons in 2009 at its San Cristobal mine, Takahiro Izuta, the project’s general manager, said.

Zinc has gained 27 percent in the past year as China, the fastest-growing major economy, and emerging markets drive demand for metals used in homes and cars. Trading houses in Japan are increasing overseas investment to secure supplies. China is the biggest consumer of the metal used to galvanize steel.

Sumitomo took full ownership of the mine, the world’s third-biggest producer of silver and sixth-largest of zinc, in March 2009 after its partner, Apex Silver Mines Ltd., filed for bankruptcy. Investment in the mine totaled $1.4 billion, up from the initial estimate of $600 million, according to Sumitomo.

Profitability has improved as a result of cost-cutting and because the mine is fully operated by Sumitomo, Izuta said. The company plans to raise lead output to 76,000 tons in 2010 from 70,000 tons in 2009, while silver production will fall to 12.1 million ounces from 16.1 million ounces, he said.

Ore shipments to the Chilean port of Mejillones from the mine resumed 10 days after protesters demanding royalty changes and infrastructure improvements blocked railway access to the mine April 12, according to the company.

“Although there have been shipment delays of 15 days to one month following the protests, production was not disrupted and we’ve been increasing shipments to catch up,” Izuta said.

The San Cristobal mine in Bolivia’s central Potosi region processes 40,000 tons a day of ore that contains zinc, lead and silver, according to the company. The mine ships ore to Europe, South Korea and Japan, and supplies about 30 percent of Japan’s total zinc ore needs, Izuta said.

KHI eyes steel abroad

Kawasaki Heavy Industries Ltd. may buy steel plates from China and South Korea for the first time to build ships if domestic prices rise too much.

“We wouldn’t deny the possibility of using imported steel,” Nobumitsu Kambayashi, president of Kobe-based Kawasaki Heavy’s shipbuilding unit, said Monday. “If we fail to agree with domestic mills on prices and we find overseas-made steel offers an advantage in terms of quality, delivery and price, we will have to turn to it.”

Kambayashi’s comments come as Nippon Steel Corp. and JFE Holdings Inc. press customers to accept higher prices because of the increased cost of iron ore and coal, two key steelmaking raw materials. The move underscores the rising competition Japanese steelmakers face from China, whose five largest mills overtook Nippon Steel in terms of production last year, knocking it out of its slot as the world’s second-largest steelmaker.

Kawasaki’s venture with China Ocean Shipping Group Co. in Nantong, eastern China, has already purchased a small amount of steel for use in vessel handrails and stairs from Shanghai-based Baosteel Group Corp. on an experimental basis, Kambayashi, 62, said. Like Kawasaki’s domestic shipyards, the Chinese venture buys higher-performance plates produced at Japanese mills, including JFE.

Nissan Motor Co. is evaluating Baosteel’s products for global purchasing, the Chinese mill announced Monday. Mitsui Engineering & Shipbuilding Co. this year received a sample of plate produced by Posco, South Korea’s largest mill, and may use it after checking prices and services, spokesman Masatoshi Inui said.

Price negotiations for the six months to Sept. 30 may drag on for another month, Kambayashi said.

To curb costs, Kawasaki Shipbuilding is also seeking to use futures to hedge against price volatility of steel plates, Kambayashi said. Vessels are typically delivered to customers about three years after contracts are signed, making it hard for shipyards to pass higher costs onto buyers if prices fluctuate.

“We’d like to make use of futures if we can,” Kambayashi said.

Deutsche Bank AG and Credit Suisse Group AG started offering so-called iron-ore swaps in 2008. The swaps allow users to fix prices in advance for single cargoes. While Kambayashi is “interested” in the scheme, he said his company might still have trouble hedging costs because it doesn’t produce steel.

The contract price of iron ore will rise more than 20 percent this quarter, Eiji Hayashida, president of JFE’s steel unit, said June 22. This would follow a 90 percent gain in the preceding quarter.

Japanese mills and domestic yards are in the final stage of talks to raise plate prices by ¥20,000 a metric ton for the April-September period, the Japan Metal Daily said June 22, without giving price levels. Kawasaki Shipbuilding is still in negotiations and is asking mills not to raise prices, Kambayashi said.

“Shipbuilders and steelmakers have closely worked together in the postwar period,” Kambayashi said. “We should continue walking along together.”

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