MITSUI MINING & SMELTING CO., LTD. History

Company History:

Mitsui Mining & Smelting Co., Ltd. (MMS) is one of Japan's leading smelters of zinc, copper, and other nonferrous metals. The company also trades in precious metals, and has developed a growing assortment of processed metal products for the automotive and electronics industries. After a difficult period in the mid-1980s, MMS has determined to free itself of dependence on fluctuating metal prices by concentrating on value-added products and its growing work in the electronics sector.

MMS was created as Kamioka Mining & Smelting Co., Ltd., in 1950 when Mitsui Mining Company was forced to dissolve by the Allied occupation forces in Japan. Mitsui Mining was one of the oldest and most important of the many affiliates of the Mitsui zaibatsu, or conglomerate, its large coal mines having first been acquired by the parent company in 1889. Mining of coal and nonferrous metals soon became one of the three pillars of the vast Mitsui empire, along with banking and trade; and Mitsui Mining, which was founded as a separate company in 1892, continued for many years to occupy a central place in Mitsui's strategy. Able to exploit at that time the labor of poorly paid women and children, prison convicts, and often prisoners of war, Mitsui Mining was not only extremely profitable but also provided the steady income that allowed the zaibatsu to diversify continuously into other, riskier areas. The company's bulwark was the mining of coal from its Miike mines on the island of Kyushu, but it soon acquired a host of zinc, copper, lead, gold, and silver mines around Japan. Its precious-metals holdings were especially important as a means of stabilizing income during the often-wild price fluctuations of the industrial metals, the value of gold tending at that time to remain much more stable.

During Japan's frequent wars, Mitsui Mining also reaped the benefits of increased demand for coal to fuel ships, and lead for the manufacture of bullets. When the Japanese began experimenting with chemical and bacteriological weaponry after World War I, these too were handled by a company carved out of Mitsui Mining: Mitsui Chemical. Mitsui Chemical also directed the reduction of coal into synthetic oil, critical to Japan's performance in World War II. During the later conflict, Mitsui Mining was the country's largest employer of Chinese and Korean prison laborers, whose treatment is reported to have been very poor.

For all of the above reasons, Mitsui Mining was an integral part of Japan's war machine as well as remaining one of the key firms in the Mitsui group. As a result, when General Douglas MacArthur and the Allied occupation forces attempted to dismantle the monopolistic power of Japan's great zaibatsu at the conclusion of the war, Mitsui Mining was one of the dozen or so Mitsui affiliates singled out for special attention. The aim of the occupiers was both to weaken Japan's ability to wage war and to encourage Western-style democracy by fostering competition in each industry. Mitsui Mining was felt to be doubly objectionable, having provided raw materials for the war effort and also ranking as Japan's leading producer of coal and nonferrous metals. Occupation authorities therefore ordered the company to be divided into two parts. Mitsui Mining Company was instructed to continue its coal production, based at the Miike mines, while Kamioka Mining & Smelting Company (KMS) was established to handle all other mining activities. In 1950 the two companies were legally separated and MMS began its independent career in the new Japanese economy, one that was ostensibly free of the concentrated power formerly wielded by the zaibatsu.

The Allied disruption of the zaibatsu was successful in one respect, at least--the Mitsui family and the other leading Japanese industrialist families largely lost control of their conglomerates. The Allied reorganization of Japanese business groups was short-lived, the United States's anxiety over the potential spread of communism in Asia quickly overshadowing its concern with democracy in Japan. The United States wanted a strong, dependable Japan as its sentinel in the Far East, and it was evident that the tradition of cooperation and planning embodied in the zaibatsu concept was essential to Japan's past and future economic health, however poorly it satisfied Western ideas of free competition in the marketplace or at the ballot box. Serious anti-zaibatsu policies were dropped accordingly by the time of KMS's creation, leaving the essential fabric of Japanese economic life unchanged and making it possible for the Mitsui companies slowly to re-establish their former network. One of the first manifestations of the re-emergence of zaibatsu thus came in 1952, when Kamioka Mining & Smelting Co., Ltd. was renamed Mitsui Mining & Smelting Co., Ltd.

The new MMS had taken over from its parent company the largest and highest-quality zinc mine in Japan, and probably in the entire Eastern Hemisphere. The company's Kamioka works in Toyama Prefecture, on the island of Honshu produced one-half of Japan's zinc in the early 1950s and still dominates the Japanese zinc market. Another of MMS's early successes was in lead, of which it continued to provide one-third of Japan's requirements, down since the war but soon to increase again. The case of lead was typical in the history of MMS and Japan generally: in great demand during the war for bullet manufacturing, lead's value dropped practically to nothing in the chaotic, severely depressed postwar economy. The phenomenal gains made by the Japanese economy during the next few decades, however, greatly expanded the number of peace-time uses for lead, chief among them the manufacture of batteries for automobiles and other end products. As Japan's auto industry slowly developed after the war, the demand for MMS's lead grew proportionately, fueled also by use of the metal in electric-wire sheathing and as a bearing material. MMS created a thriving business in lead by melting its bullets into batteries. A similar evolution could be traced in the example of precious metals, whose value as industrial catalysts and compounds grew tremendously after the war. MMS's gold and silver mines, though never large by world standards, thus continued to justify the expense of deeper exploration.

Another important part of MMS's business in the early 1950s, as today, was the mining and smelting of copper. Because native deposits of copper had long been exhausted, MMS was forced to look overseas for its supplies and in 1953 began a long-term relationship with Marinduque Mining & Industrial Corporation of the Philippines, buying all of its copper production for the next 30 years. In the following years, the company made many similar deals with overseas firms, including a 1969 agreement with Utah Construction & Mining Company in British Columbia to smelt 60% of the copper mined in Utah. In the following year, MMS took advantage of the relative financial strength it enjoys as a member of the Mitsui group by agreeing to participate in a loan package that would enable Freeport Sulphur Company, a U.S. firm, to build a copper mine and plant in Indonesia. For its share of the US$20 million lent by a consortium of Japanese companies, MMS was entitled to buy a percentage of the copper concentrate produced by Freeport. By means of such financial networks, Japan gained access in the postwar period to the Asian raw materials it had tried unsuccessfully to take by force.

The tremendous expansion of the Japanese economy during the 1960s resulted in a proportionate surge in sales at MMS. The burgeoning Japanese auto industry bought not only lead for its batteries from MMS but also an increasing number of die-cast parts such as door latches. The manufacturing of such finished products marked a new era at MMS, which, like the rest of Japanese industry, began a slow shift from basic to value-added products in the face of increased price competition from other Asian industrial nations. Thus, just as Japan has evolved from world domination in steel to that of ship-building and then to electronics, MMS began seeking ways to use its metal resources and experience in the manufacture of higher value-added products. In 1981, for example, the company formed a joint venture in Tokyo with Mallinckrodt Incorporated to manufacture catalysts for the food processing, petrochemical, and synthetic fiber industries. Many catalysts make use of precious metals such as gold and platinum, which bring a greater return to refiners like MMS when sold in the form of complex industrial products rather than merely as ore. MMS has continued its evolution from raw-material producer to manufacturer of material-based products, and the company clearly intends to proceed further in that direction.

The Japanese postwar economic recovery had resulted in a number of unwanted additions to Japanese life, including environmental pollution. MMS's role as a smelter of metals led it into several entanglements in this area, the most notorious of which came to a crisis in 1968. For years the population living along the Jinsu River downstream from MMS's big Kamioka zinc mines had suffered from a variety of disorders, which the residents attributed to Kamioka's contaminated effluent. As Japanese companies have traditionally been quite uninterested in addressing such problems, it was not until 1968 that investigators determined that cadmium pollution from the mines was causing a degenerative bone disease known as itai-itai or "ouch-ouch," among local residents. A lawsuit was filed by 28 citizens on behalf of some 500 alleged victims of fatal or crippling itai-itai disease and, for the first time in Japanese history, the corporation was eventually found guilty and ordered to pay damages which in the aggregate amounted to approximately one year's net income.

Continued fluctuations in the price of raw materials in the 1970s and 1980s spurred MMS's desire to add more highly processed products to its mix of sales. While it remains one of the world's top zinc smelters, MMS has also branched into the manufacturing of zinc alloys for precision casting, known in the trade as ZAPREC; and into copper, which at 20% of sales is now the company's most important metal. As a whole, the company still derived about 40% of its sales from base and precious metals in 1990, but was working hard to develop more processed metal products. This division, which contributes some 30% to corporate revenue, includes an array of more sophisticated goods such as rolled copper products, including copper shingles with artificial patina, and aluminum-oxide dispersion-strengthened copper, and electronics-related. MMS looks to the electronics field for a significant portion of its future growth. Other recently developed products are grouped under the new materials division. These include products made from high-purity metals such as tantalum and niobium, copper foil for laminates, and sputtering targets used in the application of very thin coats of metal.

MMS has not entirely abandoned its traditional strengths--it still produces battery materials, for example--but the company has clearly set its sights on joining the rest of Japan's manufacturers in the race to develop more complex and costly goods. It appears to be willing to entertain suggestions: the firm has announced deals for the production of magnetic audio-visual materials, expanded copper-foil facilities and less predictably, the manufacture of artificial soil for Japan's crowded golf courses.

Principal Subsidiaries: Hibi Kyodo Smelting Co., Ltd. (63.5%); Kamioka Mining & Smelting Co., Ltd.; Taiwan Copper Foil Co., Ltd. (95%); Hikoshima Smelting Co., Ltd.; MESCO, Inc..

Further Reading:

Roberts, John G., Mitsui: Three Centuries of Japanese Business, New York, Weatherhill, 1989.

Source: International Directory of Company Histories, Vol. 4. St. James Press, 1991.

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