Sumitomo Metal Mining Co., Ltd.
Sumitomo Metal Mining Co., Ltd.
Sales: ¥505.61 billion (US$3.72 billion)
Stock Exchanges: Tokyo Osaka Nagoya
Sumitomo Metal Mining Co., Ltd. (SMM), an integrated metal producer, is Japan’s third most productive copper mining and processing company and the largest Japanese producer of gold and nickel. Forbes, July 23, 1990, placed it in the top 400 of publicly held Japanese companies. The company has diversified widely. From mining, smelting, and metal processing, it has moved to the production of electronic and construction materials, catalysts, lubricants, and nuclear fuels; has made advances in industrial pollution control technology; and has developed deep seabed mineral resources. It prospects for mineral resources overseas, and buys and mines them, in addition to selling its own products and technological assistance.
Sumitomo Metal Mining Company was the first industrial venture by the house of Sumitomo, founded in the 17th century by Masatomo Sumitomo, a Buddhist priest who turned bookseller and apothecary after his sect was dissolved by the ruling Tokugawa shogunate.
He issued the “founder’s precepts,” preserved to this day by the Sumitomo companies. As quoted in “A Brief History of Sumitomo,” these called for “integrity and sound management, foresight and flexibility” and stated that “under no circumstances” should the house of Sumitomo “pursue easy gains or act imprudently.” Company members were to sell nothing on credit and buy nothing below the market price without knowing its origin, presuming such merchandise to be stolen. They were never to lose their tempers and never to speak “intemperately or harshly, whatever the other party says.” They were to beware of “unwary charity” and give nothing away, not even “one night’s lodging.”
The medicine and book shop was opened in Kyoto in the mid-17th century, not long before Sumitomo’s death in 1652 at age 44. Earlier, also in Kyoto, the family entered into copper mining. Sumitomo Metal Mining dates from this period. Riemon Soga, Masatomo’s brother-in-law, had opened a small copper refining shop in Kyoto, when he was 18 years old. If Sumitomo was the spiritual pillar of the family, Soga Riemon was its technological pioneer. He learned from China how to extract silver from copper ore and taught the process to the oldest son. The son taught it to Sumitomo, who adopted him after Riemon Soga died. The ability to extract silver from copper ore was crucial; otherwise the ore would be shipped out at great loss. This breakthrough occurred between 1596 and 1615. Soga then expanded into copper trading and copper mining. He died in 1636 at the age of 64. His oldest son married Sumitomo’s daughter and was adopted into the Sumitomo family. This son, Tomomochi, brought the family into the refining and crafting of copper.
Around 1623, while still in his teens, Tomomochi Sumitomo moved his main shop from Kyoto to Osaka, a city crisscrossed by canals, where the daimoys, or feudal lords, had their storehouse estates and wealthy merchants their warehouses. The shop engaged in trade with Nagasaki, Japan’s main port. Tomomochi Sumitomo was welcomed by the Osaka copper refiners, who remembered how his father had shared with them the new silver-extraction technique, despite his own precept that forbade giving anything away. Soon there were three Sumitomo refineries in Osaka, and another in Kyoto.
In 1652 Tomomochi succeeded Masatomo as head of the Sumitomo family. His Osaka refinery became the hub of Japan’s copper industry and remained the hub to the end of the Edo period and the start of the Meiji period in 1867. Tomomochi died in 1662. His 15-year-old son Tomonobu succeeded him as family head, inheriting the copper guild rights of both Soga and Sumitomo families. Indeed, of 16 copper-refiners selected by the ruling shogunate for copper guild membership, 4 were the Sumitomo’s. Considerable expansion of the family business followed.
In 1674 the family opened a branch office in Tokyo, then called Edo, in order to be closer to the copper mines of the area. In a few years the family was handling more than one-third of the nation’s 1,800 tons per year of copper exports.
Copper processing was a government-controlled industry. All copper had to be refined in Osaka, by decree of the shogunate, which wanted to be sure that no copper ore left the country with silver in it. From 5,400 tons of copper refined annually came 2.6 tons of silver. Osaka had one copper refiner to every 300 residents, it was claimed at the time.
Copper exports reached 3,000 tons a year by 1688. The event that made the fortunes of the house of Sumitomo was the discovery in 1690 of the huge Besshi Copper mine on the island of Shikoku. The new mine was soon producing more than one-quarter of the nation’s output, 1,520 tons of 6,000, at a time when Japan was a leading world producer of copper. The Sumitomo family became the official supplier of copper to the Tokugawa shogunate. The family also collected taxes for the Tokugawa family.
In 1749 the nearby Tatsukawa mine was added to Besshi. The family merged it with Besshi in 1762. Meanwhile, the Sumitomo refining operation achieved such a good reputation that visitors came from Europe to inspect it, for example, the German scholar, Philipp Franz von Siebold, in 1826.
Trouble arose in 1865, when the shogunate, under pressure from rebels, rescinded its policy of buying designated copper for foreign trade, the bulk of Besshi’s output, and also required the Sumitomo family to pay special assessments. The Meiji Restoration was under way and with it the end of the feudalistic Tokugawa shogunate, which had ruled for 264 years. Copper prices were falling, and the price of rice, the staple of the miner’s diet, was rising. The miners were issued paper and wooden tokens instead of money. The mine faced bankruptcy; the Sumitomo family, unable to collect on its loans to warlords, was forced to mortgage its household goods.
The family wanted to sell the mine, thus closing the enterprises, but the newly appointed general manager of the Besshi mine, Saihei Hirose, persuaded the family not to do so. Hirose had virtually grown up at the mine, having gone to live there with his uncle, the manager, when he was eight, and having worked there since he was ten, when he started as an office boy. He abolished the mine’s seniority system and brought in managers from outside the company.
The Meiji Restoration of 1868 produced another crisis. The new government confiscated the mine, but Hirose again saved the day, persuading officials to let Sumitomo run it. The family eventually regained ownership.
Meanwhile the zaibatsu system became the mainstay of Japanese business and industrial growth. Established as a zaibatsu, the Sumitomo family took its place in the financial oligarchy that worked with the government to develop modern industry in Japan. Acting as banker for the government and running a number of state-initiated industries, Sumitomo became one of the top three zaibatsu, after Mitsubishi and Mitsui. Each operated simultaneously in finance, commerce, and industry, enjoying considerable competitive advantage because they alone had enough capital to invest in major enterprises.
The Sumitomo family at first had its hands full managing the Besshi Copper mine and related activities. Not for ten years after the 1868 Meiji restoration, for instance, did the company have a director-general of its activities, the mine manager Hirose, who doubled in the position while remaining mine manager. Its development as a full-blown zaibatsu occurred over several decades as a natural outgrowth from mining. Thus the family moved from copper mining and refining to copper rolling and steel manufacture, among a number of other industrial enterprises. Like other zaibatsu Sumitomo at length became a conglomerate with interests in many branches of industry, beyond the original mining and refining business.
In 1872 the family bought a 54-ton-capacity wooden steam ship from the British for hauling copper and supplies between the Besshi mine on Shikoku and the ports of Osaka and Kobe. Hirose hired a French engineer, Louis Larroque, at the very high salary of US$600 a month, to show his employees how to modernize. Larroque told them what was needed but his two-year contract was not renewed. Instead, Hirose sent two of his employees to France to study mining and metallurgy. He saw the need for a scientific approach, but he also wanted to avoid excessive dependence on foreign experts.
By 1880 Japan was mining almost 5,000 tons of copper a year. By the mid-1890s, it was mining four times that amount. Besshi production grew proportionately, from 420 tons in 1868 to more than 2,000 in 1890.
Hirose retired in 1894 at the age of 66 as first director-general of the Sumitomo enterprise, a post that he had assumed in 1878. His nephew Teigo Iba, a former judge, succeeded him immediately as head of mining. In this capacity, heeding protests by local farmers, he moved the Besshi smelters to an island some 20 kilometers away.
Sumitomo had already acquired two coal mines, in Kyushu in 1893 and 1894, with a view to becoming self-sufficient in its copper refining. It continued to acquire coal mines, especially under Masaya Suzuki, director-general between 1904 and 1922, who secured the Sumitomo industrial base. Unlike the top two zaibatsu, Mitsubishi and Mitsui, Sumitomo had been industrially based from the outset. Its core enterprise remained mining and metallurgy despite diversification.
The average annual production of Japanese copper rose steadily before and during World War I, which was a prosperous time for Japan. Then it dropped steadily for several years, bottoming out in 1922.
In 1928 Japan was sixth among copper-producing nations, with 3.9% of the world’s supply. It had been in third place only ten years earlier. Unable to compete on price with foreign copper, it was importing much more copper than it was exporting. In 1937, when Sumitomo was the leading Japanese producer of nonferrous metals, the Besshi copper operation was merged with the coal companies to form Sumitomo Mining Co., Ltd.
Sumitomo was much more centralized than other zaibatsu. The family was far more dominant in running the holding company, and the holding company was far more involved in running the subsidiaries, including the mining operations. The family followed the rule of primogeniture strictly, and the head of the family in 1937 held more than 98% of the holding company’s shares.
During World War II, the Sumitomo mines and other enterprises began operating more independently. The number of enterprises, or holding-company subsidiaries, grew from 40 to 135 firms during the war, their paid-in capital from ¥574 million to ¥1.92 billion.
Expansion ended with the war’s end. The Sumitomo zaibatsu was dissolved with the others under Allied policy. The many enterprises were left to survive on their own. The director-general, Shunnosuke Furuta, a popular engineer, turned to trade to provide work for the company’s employees, turning the clock back to the 1868-1900 period, when the family ran copper shops in Kobe and Korea, selling not only copper but also cotton cloth, silk, tea, and other goods. The move to commerce looked back even further, to the medicine and book shop that the founder Masatomo Sumitomo had started in the 17th century. Trading was the Sumitomo family’s earliest activity, even before copper mining, and it was to contribute to the overall Sumitomo renaissance in the late 1940s and 1950s. Furuta resigned as director-general in 1946, after supervising the dissolution of the zaibatsu. The holding company was dissolved in February 1948. Its subsidiaries became independent companies, although their executives met regularly on a cross-company basis.
In 1950 two companies were formed from Sumitomo Mining—Sumitomo Coal Mining Co., Ltd. and Sumitomo Metal Mining Co., Ltd., a producer of nonferrous metals. The family’s role in its management was greatly diminished in the new, keiretsu structure established in the 1950s. Like the other keiretsu, Sumitomo companies usually conformed to government regulation. Sumitomo Metal Mining was an exception, however, in the 1960s, when it ignored production limits and suffered government-ordered reductions in its coal import quota.
By 1982 Sumitomo Metal Mining, the oldest company in the Sumitomo group, was only a small part of the group, capitalized at ¥17.4 billion (US$72.3 million), compared to ¥124.3 billion (US$516.4 million) at which the group’s leading company, Sumitomo Metal Industries, was capitalized. SMM sales that year were ¥290.8 billion (US$1.2 billion). Copper mining and refining accounted for 22% of sales, nickel 16%, gold 27%, cobalt 3%, construction materials 5%, zinc 5%, and other products 22%.
As the 1990s began, Sumitomo Metal Mining was more a gold and nickel mining company than a copper producer. Its Kagoshima mine had very high grade gold and deposits. It had invested in Phelps Dodge, the major U.S. copper producer. In addition it was making a full-scale advance into the housing market.
Hakusui Brass & Copper Co., Ltd.; Fuji Brass & Copper Co., Ltd. (90.1%); Siporex Manufacturing Co., Ltd. (95.2%); Hyuga Smelting Co., Ltd. (60%); Japan Nuclear Fuel Conversion Co., Ltd.; Sumitomo Metal Mining, Arizona, Inc. (U.S.A., 75%); Sumitomo Metal Mining Pte., Ltd. (Singapore); Sumitomo Metal Mining U.S.A., Inc.
Moulton, Harold G., with Junichi Ko, Japan, an Economic and Financial Appraisal, Washington, D.C., The Brookings Institution, 1931; Mitchell, Kate L., Japan’s Industrial Strength, New York, Alfred A. Knopf, 1942; Gibney, Frank, Miracle by Design: the Real Reasons Behind Japan’s Economic Success. New York, Times Books, 1982; Prestowitz, Clyde V., Jr., Trading Places: How We Allowed Japan To Take the Lead, New York, Basic Books, 1988.