Nippon Steel eyes more stakes in coking coal mines to secure stable supply

TOKYO (Reuters) - Nippon Steel Corp, the world’s No.4 steelmaker, is looking to buy more stakes in coking coal mines to secure stable supply of the key steel-making ingredient, its executive said.

FILE PHOTO: A production line of Nippon Steel & Sumitomo Metal Corp.'s Kimitsu steel plant is pictured in Kimitsu, Chiba Prefecture, Japan, May 31, 2018. REUTERS/Kim Kyung-Hoon/File Photo

Japan’s biggest steelmaker already owns stakes in several coking coal mines and iron ore mines, procuring about 20% of the 27 million tonnes of its annual import of coking coal and the 58 million tonnes in iron ore import from those holdings.

“It’s not necessary to stop at the 20%,” Takahiro Mori, executive vice president, told Reuters on Tuesday in an interview.

“We are considering raising the self-sufficient ratio by buying interests in raw materials (assets) that are meaningful in our strategy, high-quality and economical,” he said.

For the steelmaker, more urgent need is to invest in coking coal mines than iron ore projects, Mori said, as Western sanctions on Russia over the invasion of Ukraine 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.

“The hurdles for mining investment have risen considerably due to the global decarbonisation trend, but a certain amount of coking coal will be needed to produce steel even after carbon neutrality is achieved in 2050,” he said.

Nippon Steel has no plan to invest in thermal coal mines, Mori said.

The steelmaker’s net profit for the April-September period rose 25% to 372 billion yen ($2.7 billion) on inventory valuation gains and higher product prices while stronger contribution from its stakes in upstream assets helped offset surging raw materials costs.

Going forward, Nippon Steel is concerned over 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 delayed recovery in Japanese automobile production.

“We want to maintain the growth trend in our profit next year by cutting variable costs further and boosting the proportion of high-value products,” Mori said.

($1 = 138.7200 yen)

Reporting by Yuka Obayashi and Miho Uranaka; Editing by Tomasz Janowski