NIPPON STEEL AND BRAZILIAN MINING GROUP TO CONSIDER FORMING ALLIANCE TO DEVELOP COAL AND IRON ORE
Nippon Steel, the world’s second-biggest steelmaker by output, and Companhia Vale do Rio Doce, the Brazilian mining company, yesterday saidthey were considering jointly developing coal and iron ore projects, writes Mariko Sanchanta in Tokyo.
The decision emphasises Nippon Steel’s push this year to forge international alliances in the wake of consolidation in the industry, which had been sparked by Mittal Steel’s takeover of Arcelor. Increased competition from China – the world’sbiggest buyer of raw materials – has increased pressure on Japanese steelmakers to form long-term contracts with suppliers.
Nippon Steel and CVRD said yesterday they also intended to increase co-operation with Nibrasco and MBR, two jointly held companies. The former manufactures iron pellets in Brazil, and is 25 per cent held by Nippon Steel and 51 per cent held by CVRD. MBR supplies Nippon Steel with iron ore.
The agreement follows Nippon Steel’s agreement with Posco, the world’s third-largest steelmaker by output. The two companies are set to jointly negotiate iron ore prices this year for the first time in an effort to increase their purchasing power.
The unparalleled deal between the Japanese and South Korean groups highlights the fact that Japan has ceded negotiating power to China, now the world’s biggest buyer of raw materials. China is poised to lead the negotiations for benchmark prices for 2007.
Iron ore prices have risen substantially in the last few years amid tight supplies because of strong demand from China. Most analysts forecast a rise of at least 5 per cent in 2007 and some even forecast a double-digit increase.
Two years ago, Nippon Steel announced a long-term pactwith Rio Tinto to secure stable raw material supplies to help the Japanese steelmaker meet surging demand from neighbouring China.
Copyright The Financial Times Limited 2006
