"We don't have room to make new export deals in the spot markets," a trader at a smelting company said. Prospects for stagnant domestic demand forced Japanese smelters to reduce sales of copper to domestic buyers for 1999 and boost term contracts with buyers in Taiwan, Southeast Asian countries and China, but domestic demand for tubes and plates so far has been better than earlier estimated, he said.

In spot markets, Japanese smelters actively sold copper cathodes to China for January-March shipment but are unlikely to sell the metal to Chinese buyers who have re-emerged inspot markets since mid-May, he said. Industry sources have said they expect Japan's copper cathode exports to remain at a high level in 1999, similar to 270,000 tonnes in 1998, which was up nearly 70 per cent from 1997.

Smelters have secured enough Asian buyers to ship some 200,000 tonnes of copper cathodes in 1999 as they try to offset a recession that in 1998 cut domestic demand for copper by 9.8 per cent to 1.36 million tonnes. Tetsuichi Kagawa, executive vice president of Nippon Mining & Metals, said last month Japan's largest copper smelter planned to export about 30 per cent of its copper output in the 1999/2000 business year to next March.

In 1998/99, Nippon Mining sold 129,297 tonnes of copper or about 34 per cent of its total output to customers mainly in East Asia, up sharply from 79,979 tonnes in 1997/98, the company's earnings data showed. He said Nippon Mining planned to operate at full capacity in 1999/2000 after raising its copper refining capacity to 420,000 tonnes a year last December.

The company produced 375,933 tonnes of copper in 1998/99, up 3.7 per cent from a year earlier. Masashi Shimada, assistant general manager for copper and aluminium at Mitsubishi Corp, recently told a Metal Bulletin Copper Conference that Japan may shake off its long-term role as a net importer of copper.

A contraction in demand due to Japan's recession and higher domestic smelting slashed imports to 271,000 tonnes last year, while exports of refined copper rose to 270,000 tonnes in the year, the highest since 1974, he said. A trader said: "Copper supply in Japan is tight now because of a combination of various factors... However, it is not because domestic demand is remarkably good... In addition to active exports, supply of copper scrap, which accounts for nearly 10 per cent of domestic copper supply, has been extremely low," he said. Another trader said the brass milling industry has been hit harder than wire and cable makers as its dependence on copper scrap is high. He also said: "More serious problemsmay arise in the future if supply of scrap remains tight as smelters need copper scrap for producing refined copper." Some traders said, however, it is still uncertain whether the currently tight domestic supply will continue towards the third to fourth quarter.

"It is up to demand from the brass milling industry as demand from wire and cable makers remained weak in April and May and is expected to be so in June," a trader said. There are signs that home appliance makers have started reducing production of air conditioners after a round of output increases to meet summer demand, traders said.