Nippon Steel May Invest in Vale's $1.4 Billion Mozambique...

Nippon Steel May Invest in Vale's $1.4 Billion Mozambique Mine

2008-05-19 14:00 (New York)





By Yoshifumi Takemoto and Wendy Pugh

May 20 (Bloomberg) -- Nippon Steel Corp., the world's

second-biggest maker of the metal, wants to invest in Cia. Vale

do Rio Doce's $1.4 billion planned coal mine in Mozambique to

provide raw materials as costs rise.

Tokyo-based Nippon Steel told Brazil's Vale, the world's

biggest iron ore exporter, it's interested in the mine, Shoji

Muneoka, who became president last month, said in an interview.

Coking coal prices tripled this year to a record.

Nippon Steel expects profit to fall to a five-year low as

it can't raise prices enough to cover higher material costs.

Surging costs prompted ArcelorMittal, the world's largest

steelmaker, to buy stakes in mining assets.

``In this extraordinary circumstance of soaring material

prices, we have great interest in alternative sources,'' the 62-

year-old executive said in Tokyo. ``We like to invest if we have

opportunities.''

Nippon Steel fell 17 percent in Tokyo trading in the past

year compared with a 49 percent gain in ArcelorMittal, on

concern the company can't get customers to agree to price gains.

The company lost 1.9 trillion yen ($18 billion) in market value

since last year's high in July, leaving it vulnerable to a

takeover, Muneoka said.



Takeover Potential



``It is possible any company outside Japan looking at our

technology and customers will be interested in acquiring us,

considering that our current market cap is far from

satisfactory,'' Muneoka said.

Nippon Steel, which got about 25 percent of its coal in

2006 from mines it partly owned, hasn't held ``concrete talks''

with Rio de Janeiro-based Vale, Muneoka said. Vale's spokeswoman

Patricia Malavez declined to comment.

The Mozambique mine will cost $1.4 billion to build, Vale

said in an October statement. The mine may be the largest in the

Southern Hemisphere, producing 8.5 million metric tons of coking

coal and 2.5 million tons of thermal coal a year and may start

output in the first quarter of 2011, according to the statement.

Nippon Steel said in April its profit will fall 41 percent

this year after floods in Australia caused coal prices to triple,

and Vale won a 65-percent increase in iron ore prices.

Annual coking coal contract prices rose to a record $300 a

ton in the year from April 1. Nippon Steel bought 21.9 million

tons of coal in fiscal 2006, the latest data available.



Coal Imports



Higher costs are prompting Nippon Steel to increase product

prices. The company will raise contract steel prices by between

25,000 yen and 30,000 yen a ton for Toyota Motor Corp. in the

year from April and by almost 30,000 yen a ton for Mitsubishi

Heavy Industries Ltd., Japan's largest heavy machinery maker, a

person familiar with the talks said May 19.

Muneoka, who previously led price negotiations with

carmakers, joined Nippon Steel when the company was formed in

1970.

Net income may fall to a five-year low of 210 billion yen

in the year ending March 2009, from a record 355 billion yen,

Nippon Steel said April 25. Costs will ``have a 1 trillion yen

negative impact'' this year, Kiichiro Masuda, executive vice

president, said.