* Firms beef up higher margin materials to stabilise
* Sumitomo Metal to spend $153 mln on battery materials
* JX eyes increased output of materials for electric
By Yuka Obayashi
TOKYO, Dec 20 Stung by years of falling base
metals prices, Japanese mining and smelting firms are investing
hundreds of millions of dollars in specialised materials used in
electric vehicles, smartphones and a host of everyday electronic
Companies such as Sumitomo Metal Mining and JX
Nippon Mining & Metals, a unit of JX Holdings, are
seeking a steady revenue stream in the face of narrow smelting
margins and recent heavy write-offs on base metals mines.
The firms hope to cash in on a push by global automakers
into electric vehicles as well as new uses for their metals in
the coming era of the Internet of Things when everything from
screwdrivers to cars is expected to be linked to the Internet.
"We want to stabilise our income by nurturing our materials
operation into our third business pillar [along with mining and
smelting]," Yoshiaki Nakazato, President at Sumitomo Metal
Mining told an analyst meeting.
Specialised materials made from metals in the form of
powders, foil and plate to make super-thin film are used in
products from batteries for electric vehicles through to
appliances like smartphones, airconditioners and rice cookers.
They command high margins due to the difficulties of
manufacture and the need for high performance.
Sumitomo Metal, Japan's biggest nickel smelter, is set to
invest 18 billion yen ($153 million) to boost output of cathode
material for Panasonic's electric vehicle lithium-ion
batteries (LiB) to meet demand from Tesla Motors.
With electric vehicle (EV) sales expected to rise sharply,
research firm Fuji Keizai sees the amount of cathode material
used in onboard LiBs jumping nine-fold by 2020 from 2014. The
material used in cylinder LiBs, used in Tesla's EV battery along
with mobile phone chargers and other devices, will nearly double
"The business environment is headed in a positive direction
as Toyota Motor is reportedly entering the EV market by
2020," Nakazato told last month's meeting, following local media
reports the world's top-selling automaker is looking at mass
producing long-range EVs by 2020.
The move comes as the United States, China and European
countries are encouraging automakers to make more all-electric
battery cars as they push alternative energy strategies.
JX also hopes to capitalise on the growing smart car market.
The nation's biggest copper producer plans to start mass
production of hyper tin, a new plating used in connectors
between electronic parts in smart cars and other devices, at a
plant near Tokyo in fiscal 2017/18, followed by a new production
line at a plant in central Japan, a company spokesman said.
It is also looking at boosting production of semiconductor
targets, used to make metal thin film just several billionths of
a metre thick, and rolled copper foil.
A common concern is that rapidly changing technology in
electronics and automobile equipment means specific materials
may become either commoditised or quickly outdated.
"The materials or the parts which are used now may not be
used some years later. So we need to keep up with these changes
and stay ahead of competitors," said an official at a base
metals company, who asked not be named.
However, analysts said the sector was set to grow.
The changes at Sumitomo Metal could help it more than double
recurring profit from its material business to 14.4 billion yen
($123 million) by 2018/19 from three years earlier, said Daiwa
Securities' analyst Shinichiro Ozaki.
"Sumitomo Metal is making the right moves as stronger
materials will help it diversify the risk of profit swings, and
because the materials market has growth potential," he said.
Mitsubishi Materials is also reinforcing its
downstream businesses, buying a UK firm for about $300 million
in September to broaden its copper processing business with a
focus on automobiles and medical equipment.
Smaller rivals Dowa Holdings and Furukawa Co Ltd
are investing in research and development for
($1 = 117.2900 yen)
(Reporting by Yuka Obayashi; Editing by Richard Pullin)