TOKYO: Nippon Steel, ranked as the world’s fourth-largest steelmaker, affirms its ongoing pursuit of stakes in coking coal and iron ore mines, aiming to secure essential raw materials and counteract potential price fluctuations, according to a company executive. In a recent landmark deal led by Glencore (GLEN.L) this month, a consortium including Nippon Steel finalized the acquisition of Canadian miner Teck Resources’ (TECKb.TO) steelmaking coal unit for $9 billion. Nippon Steel will specifically pay approximately $1.34 billion for a 20% stake in this venture.
Executive Vice President Takahiro Mori highlighted concerns over tighter coking coal supply and anticipated price rises in the medium term due to limited investments in mines amid the push for carbon neutrality. He emphasized the critical nature of securing the company’s interests in this context. Nippon Steel, already holding stakes in multiple coking coal mines, aims to increase its self-sufficiency ratio in both coal and iron ore to neutralize the influence of raw material prices on market products. The company presently imports around 50 million metric tons of iron ore, with 20% sourced from its equity holdings.
The acquisition of a 20% stake in Teck’s coking coal business is expected to elevate Nippon Steel’s annual profit by approximately 70-80 billion yen ($476-543 million) at current price levels, Mori revealed. With a revised net profit forecast of 420 billion yen for the year through end-March, Nippon Steel anticipates improved margins, particularly from its overseas business. Notably, the company’s Indian joint venture with ArcelorMittal (MT.LU), utilizing natural gas instead of coking coal for steel production, contributed significantly to enhanced profits. While this gain was a one-off, Mori stated the unit’s continued strategy to hedge LNG prices through long-term contracts to mitigate risks associated with price volatility, ensuring a stable operational environment for the foreseeable future.