Nippon Steel Increases Ratio of Mined Ore to 40%, Ensuring Stable Procurement through Overseas Investment
Nippon Steel, the world's fourth-largest steel producer, is enhancing supply chain stability by announcing a policy to increase the proportion of coal and iron ore procured from its mines from the current 20-30% to around 40% in the future.
Japan, March 15, 2024 - Nippon Steel has announced a policy to increase the proportion of coal and iron ore procured from its mines from the current 20-30% to around 40% in the future. This move aims to ensure a stable procurement of raw materials and reduce costs. JFE Steel is also gathering information on new coal interests and will consider how to increase the ratio from its mines to about 10%.
Global decarbonization has led to stagnation in coal development, highlighting the risk of tight supply and demand for raw materials and price increases. Efforts will be made to alleviate this impact by increasing the ratio of mined ore.
In 2022, Nippon Steel’s mine ore ratio in its domestic steelmaking business was approximately 20% for iron ore and coal. However, in January 2024, the company invested approximately 20% in Elk Valley Resources (EVR), a high-quality Canadian coking coal company. This investment is expected to increase the ratio to approximately 30%.
The company has invested approximately 200 billion yen in EVR, and Vice President Hiroshi Moritaka explains that if there are any promising projects, the company will continue to invest in them and would like to increase the ratio to around 40%. Regarding the 40% ratio, Mr. Moritaka said, "This is also the proportion of general-purpose products sold at stores in our steel products. This area is directly affected by fluctuations in raw material prices, making it difficult to secure a margin compared to products with strings for large customers." The company intends to avoid the effects of fluctuations by raising the ratio of mined ore to around 40%.
In recent years, Nippon Steel has aimed to strengthen its competitiveness by establishing a vertical business structure, from raw material procurement in upstream processes to production in midstream processes and distribution in downstream processes. The company is moving forward with the goal of "realizing a solid consolidated earnings structure" that is unaffected by the external environment and will accelerate this initiative in terms of raw material procurement.
On the other hand, JFE Steel, which owns around 10% of its mines, is gathering information on investment projects in coal interests. Masashi Terahara, Vice President of JFE Holdings, said, “If there is a project, we will consider ways to participate.” Major overseas steel companies are competing for stable procurement of raw materials. With limited off-take rights, there are concerns about whether procurement will be possible in the future.
