Executives at Japan’s Nippon Steel, the world’s fourth-largest steelmaker, said the company would continue to seek stakes in coking coal and iron ore mines to ensure stable supplies of basic raw materials and mitigate the potential for price fluctuations.
Reuters reported that a consortium led by Glencore and including Nippon Steel struck one of the biggest mining industry deals in years this month, agreeing to buy the metallurgical coal business of Canada’s Teck Resources for $9 billion. . Among them, Nippon Steel will pay approximately US$1.34 billion to purchase 20% of the equity.
“The push for carbon neutrality, which has led to little investment in coal mines, will affect supply tightening in the medium term and coking coal prices are expected to rise.” Nippon Steel Executive Vice President Takahiro Mori told Reuters in an interview on Tuesday. “So securing our own equity is extremely important.”
Nippon Steel already owns stakes in several coking coal mines, which account for about a fifth of Japan’s total annual coal imports of 25 million tons. The latest deal will increase that share to around 30%.
About 60% of Nippon Steel’s products are sold to long-term customers, and the sales price will be adjusted based on the cost of raw materials, but 40% of them are commodities affected by fluctuations in the steel market.
“We hope to increase the self-sufficiency rate to about 40% to offset the impact of raw material prices on market products.” He was referring to coal and iron ore. Currently, 20% of the company’s 50 million tons of iron ore imports come from its equity holdings.