By Yuka Obayashi and Ritsuko Shimizu
TOKYO (Reuters) - Japan's Sumitomo Metal Mining Co Ltd (SMM) <5713.T> plans to focus on two key customers for its battery materials, Toyota Motor Corp <7203.T> and Panasonic Corp <6752.T>, supplier of car power packs to Tesla Inc
While Toyota and Panasonic are already SMM's biggest customers, rising sales of electric cars - led by Tesla's mass-market Model 3 - mean the Japanese miner and smelter is in a sweet spot it needs to protect.
SMM has spent 37 billion yen (254.44 million pounds) over the past four years to boost capacity of the nickel-cobalt-aluminium (NCA) cathode materials used in Panasonic's lithium-ion battery that powers Tesla's Model 3 and Model X.
"Our cathode material plants are running at full capacity," Akira Nozaki, president of Sumitomo Metal Mining, told Reuters in an interview on Thursday.
The company's monthly capacity of NCA cathode materials is due to reach 4,550 tonnes later this year, more than five times the monthly output of 850 tonnes in 2014, Nozaki said.
Tesla formally launched the Model 3 electric sedans in July 2017, and has attracted deposits from more than 500,000 potential customers.
After repeatedly pushing back internal targets, Tesla nearly hit its target of building 5,000 Model 3 per week for the first time in late June and "multiple times" during July. It was targeting to produce 6,000 per week by late August.
"We see Tesla's production and sales have gotten into gear," Nozaki said.
Asked about any further expansion of its capacity, Nozaki said any decision will depend on consultations with Panasonic.
SMM, in which Toyota owns 3.8 percent stake, also supplies different types of cathode materials to batteries used in Toyota's hybrid cars such as the Prius.
Nozaki said his company will likely remain focussed on its existing customers for now.
"Battery materials are a custom-made product, not a commodity," he said. "We need to join hands with our customers to be able to respond changing needs for battery materials."
SMM, Japan's biggest nickel smelter, aims to boost its annual nickel output through smelting to 150,000 tonnes by March 2022 from 90,000 tonnes in March 2018.
It also plans to increase copper output from its equity holdings in mines to 300,000 tonnes from 260,000 tonnes, and gold output to 30 tonnes from 14 tonnes.
SMM, together with nickel miner PT Vale Indonesia
If the smelter is given the go ahead, the Japanese company wants a majority stake in the project, Nozaki said.
The strength of SMM, founded as a copper smelter in 1590, lies in its integrated production from raw nickel up to electronic components including battery materials, unlike global resource majors, who tend to focus on mining or smelting, Nozaki said.
"Nickel smelters worldwide want to supply battery materials but they don't know what quality of nickel products they should offer, but we clearly understand those needs thanks to our supply chain," he said.
(Reporting by Yuka Obayashi and Ritsuko Shimizu; Editing by Tom Hogue)