Nippon Steel Corp (5401.T) is still in talks with Teck Resources (TECKb.TO), despite Glencore's (GLEN.L) bid for the Canadian miner, as Japan's top steelmaker remains eager to take a stake in Teck's high-grade coking coal asset, a senior executive said.
"We are still negotiating with Teck toward making an equity investment in coal assets," executive vice president Takahiro Mori told Reuters in an interview on Wednesday.
"The amount of our investment may need to be lifted due to Glencore's bid, but we are determined to take 15% or more stake in the coal asset so that we can make it an affiliate unit," he said.
Nippon Steel, the world's fourth largest steelmaker, wants to invest in Teck's high-quality coking coal to secure a stable supply of the key steelmaking ingredient and to gain profits from the asset, Mori said.
Asked whether Nippon Steel would invest in the coal asset if Glencore buys Teck, Mori said: "there could be a different decision if thermal coal and coking coal are integrated," pointing to a negative implication in terms of climate action.
CHINA DEMAND
Steel prices in Asia have been under pressure in recent months amid patchy economic recovery in top consumer China.
The outlook for demand in China has deteriorated compared to three months ago and a recovery could be delayed till next year, Mori said.
"Demand is expected to stay weak for a long time, with no firm economic stimulus policy in place and the real estate market remaining sluggish," Mori said.
To cut carbon dioxide emissions, Nippon Steel is considering shifting to electric arc furnaces from blast furnaces at two of its domestic steelmaking plants.
"If we decide to do it, it must be done by 2030," Mori said.
($1 = 1.3372 Canadian dollars)
