Japan Mining Report 2009

Japan remains heavily dependent on imports for raw materials, and in 2008 many major companies in the mining industries - particularly in steel, copper and zinc - announced plans for overseas exploration.

Mine acquisitions and explorations were the main overseas investments, with companies taking particular interest in Canada, Chile, Australia and the South Pacific.

Japan's mining industry was particularly impacted by the downturn in the global economy. Declining demand resulted in many companies announcing production cuts in late 2008 and early 2009. The main areas to see reductions in output were iron and steel, zinc, nickel and copper. Decline in the automotive industry in particular had a notable effect on the steel industry, with output in April 2008 sliding by almost 50% based on a year-on-year (y-o-y) performance. Slowing demand, coupled with the appreciation of the yen, made Japanese exports significantly less competitive than their overseas counterparts.

Japan struggled to meet its targets in its first year under the Kyoto Protocol. CO2 emissions increased by 1% in 2008, primarily due to the outage at one of the country's major nuclear plants, which was hit by an earthquake in 2007. The target is to cut greenhouse gas emissions by 6% from 1990 levels over the fiveyear period to 2012. Though the levels on CO2 emissions in Japan are not legally binding, companies may have to pay fines in the form of carbon emission credits should they fail to take measures to reduce their CO2 output. An increasing reliance on coal-burning power plants could see many companies in the mining industry affected by the cost of processing carbon emissions and purchasing emission offset credits.

Japan's leading mining companies all experienced declines in sales throughout the year, with most also citing a decrease in net income. To respond to the deteriorating business environment, many combined cost-cutting measures with long-term strategic investments. Nippon Mining, Mitsubishi Mining and Sumitomo Metal Mining all launched plans for overseas investments in mineral exploration. Mitsui Mining announced plans to reduce its workforce by 4,000 employees by September 2009 to cut costs.

The company did not expect to recover during fiscal year 2009, and was looking to minimise losses during this time. Dowa Holdings experienced a decline across all its business segments, including nonferrous metals, metal processing and environmental management and recycling. The company subsequently announced plans to cut costs while boosting business through improved efficiency at production plants, and also said it would be making further business acquisitions.