Nippon Steel Gets PCI Coal Mine Interest in Australia

Nippon Steel announced on Thursday the firm acquired 10% interest in Fexleigh coal mine joint venture in Queensland, Australia from Itochu Corporation effective on Wednesday. Nippon Steel got the first interest of high quality pulverized coal injection coal mine. The firm didn’t disclose the acquisition value. The firm has no current transaction from Foxleigh mine but the firm will purchase certain volume of coal. Nippon Steel tries to improve the procurement stability through the acquisition when PCI coal demand will increase in China and India while the firm hedges potential price surge risk. The firm also improves the business platform as global players through further tie-up with the joint venture partners of Anglo American and POSCO.

Foxleigh mine produces around 2.5 million tonnes of PCI coal per year at the open cut operation. The operator of Anglo American studies expansion of the mine with estimated 300 million tonnes of reserve. Nippon Steel cooperates with Anglo American with 70% interest and POSCO with 20% interest in the mine.

Foxleigh is 8th coal mine interest for Nippon Steel, which already has interest in 6 mines in Australia and in one Canadian mine. The new interest adds around 250,000 tonnes per year of captive coal for Nippon Steel. Nippon Steel already has 25-30% of equity coal for the annual total coal requirement. The new interest represents around 5% of just more than 5 million tonnes of the PCI coal requirement.

Nippon Steel expects PCI coal demand will increase to reduce cost by reducing high cost coke consumption when coking coal price increases. The firm expects PCI coal price could be supported by higher demand when Indian and Chinese steel makers increase the PCI coal consumption while PCI facility is still limited in India and China. The firm tries to secure high quality PCI coal resource through the acquisition while the firm expects effective cost will decrease by getting return from the investment.

Nippon Steel has coal mining partnership at Moranbah North mine in Australia, in which Nippon Steel has 5% interest. Nippon Steel adds another coal mining tie-up with POSCO after Carborough Downs and Integra mines in Australia and Elkview mine in Canada.

Itochu Corporation sold the coal mining asset as a part of the assets optimization program. The firm tries to seek investment opportunity for competitive coal interests in Australia to expand the equity coal assets.