Nippon Steel eyes more stakes in coal mines

Nippon Steel eyes more stakes in coal mines

4 steelmaker wants to buy more stakes in coking coal mines to ensure stable supply of the key steel-making ingredient, according to its executive.

Japan's biggest steelmaker already owns stakes in several coking coal mines and iron ore mines, which is about 20 per cent of the 27 million tons of coking coal it imports each year, and the 58 million tons of iron ore import from those holdings.

It's not necessary to stop at the 20 per cent, said Takahiro Mori, executive vice president, told Reuters on Tuesday.

He said that he believes that we are considering raising the self-sufficient ratio by buying interests in raw materials that are meaningful in our strategy, high-quality and economical.

More urgently, Mori said, the steelmaker's need is to invest in coking coal mines rather than iron ore projects, because Western sanctions on Russia have squeezed an already tight supply of commodities, such as metallurgical coal.

Iron ore prices are expected to move in line with steel demand, but coking coal prices will likely stay high due to higher thermal coal prices and falling investment in new coal mines in the global efforts to tackle climate change, Mori said.

He said that the global decarbonisation trend has caused the hurdles for mining investment to go up, but a certain amount of coking coal will be needed to produce steel even after carbon neutrality is achieved in 2050.

Mori said that Nippon Steel does not plan to invest in thermal coal mines.

The steelmaker's net profit rose 25 per cent to 372 billion yen $2.7 billion for the period from April-September to 372 billion yen, a gain in inventory and higher product prices, while the stronger stakes in upstream assets helped offset rising raw materials costs.

Nippon Steel is concerned about the weaker steel demand in top buyer China, a global economic slowdown due to interest rates hikes by the U.S. and European central banks and a delayed recovery in Japanese automobile production.

Mori said that the growth trend in our profit will be maintained by cutting variable costs and increasing the proportion of high-value products next year.