Nippon Steel ‘Interested’ in Mongolian, Russian Coal

Nippon Steel Corp., Japan’s biggest mill, is interested in investing in coal projects in Mongolia and Russia to secure raw material supplies, an executive said.

“There is plenty of high-quality coal at Elga and Tavan Tolgoi” deposits, said Shinichi Taniguchi, executive vice president of the Tokyo-based company. “We’re interested” in taking stakes or helping develop the regions, he said.

Mongolia plans to pick a contractor to mine in Tavan Tolgoi, the region with one of the world’s largest untapped deposits of steelmaking coal, while the Elga mining project in eastern Siberia is being developed by Russia’s OAO Mechel. Steelmakers are scouring the globe for iron ore and coking coal assets to protect them from rising costs.

Nippon Steel wants to see the projects in Mongolia and Russia developed “as soon as possible” to ease tightening global supply and help push down prices, Taniguchi said in an interview in Tokyo.

Nippon Steel shares fell 0.3 percent to 297 yen at the 3 p.m. close of trading on the Tokyo Stock Exchange. The stock has fallen 21 percent this year.

Contract coking coal prices for the first three months of 2011 were agreed at $225 a ton, Citigroup Inc. said Dec. 17. That’s 74 percent higher than the year earlier level.

Rich Deposits

China Shenhua Energy Co., the nation’s biggest coal producer, and Itochu Corp., Japan’s fourth-largest trading company, are among those interested in developing Tavan Tolgoi, which holds more than 6 billion metric tons of coal.

Sumitomo Corp., Japan’s third-largest trading company, expressed interest in helping develop the Elga field. OAO Mechel, Russia’s biggest producer of coal for steelmaking, sold 20 billion rubles ($654 million) of bonds this year to refinance its debt and help fund a railroad to the Elga deposit. Mechel plans to start production at Elga next year, it said this month.

Nippon Steel is seeking to obtain half of its iron ore and coal needs though its own sources, Taniguchi said, without specifying a timeframe. Nippon Steel agreed to acquire a 23 percent stake in the $600 million Revuboe coal project in Mozambique in October.

JFE Holdings Inc., Nippon’s biggest domestic rival, plans to spend as much as 200 billion yen ($2.4 billion) to invest in iron ore and coal mines in Australia and Brazil to double its self sufficiency by 2013, Eiji Hayashida, the president of the steelmaking unit said, said in a May 7 interview.

Mongolia plans to set up a state-controlled company, Erdenes Tavan Tolgoi, to oversee the deposit before the start of the mining season in April, Dashdorj Zorigt, the country’s minister for minerals and energy, said on Aug. 3. Mongolia plans to sell 30 percent of the company controlling Tavan Tolgoi in share sales to help fund $1.5 billion of the initial development cost, he said. The shares will be sold in Mongolia and overseas.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Yasumasa Song in Tokyo at ysong9@bloomberg.net.

To contact the editor responsible for this story: Andrew Hobbs in Sydney at ahobbs4@bloomberg.net.

Source:Bloomberg News Service