Japan Group to Buy Brazilian Iron Ore Stake

Tokyo, Oct. 17 (Jiji Press)--A consortium of five major Japanese
steelmakers and trading house Itochu Corp. <8001> has reached a broad
agreement to buy a stake in an iron ore mining subsidiary of major Brazilian
steelmaker Companhia Siderurgica Nacional, or CSN, it was learned Friday.
South Korea's top steelmaker POSCO will also join the consortium
that involves Nippon Steel Corp. <5401>, JFE Steel Corp., Sumitomo Metal
Industries Ltd. <5405>, Kobe Steel Ltd. <5406> and Nisshin Steel Co. <5407>,
informed sources said.
In a highly rare move, the five, or all the Japanese blast furnace
steelmakers, teamed up in an effort to ensure iron ore supply and diversify
suppliers amid surging iron ore prices.
The total investment is expected to be 300 billion to 400 billion
yen.
The CSN subsidiary, Namisa, currently produces 20 million tons of
iron ore a year and plans to double its output capacity in 2012.
The planned acquisition of a stake of an estimated 40 pct in
Namisa, will allow the Japanese consortium to procure 16 million tons of
iron ore annually after the capacity expansion.
The Japanese government is expected to support the deal by
extending loans through the Japan Bank for International Cooperation and
providing trade insurance, according to the sources.
Japanese steelmakers rely entirely on imports for their annual iron
ore demand of 140 million tons.
Of the total, more than 80 pct is supplied by three firms--Vale of
Brazil and Anglo-Australian mining giants BHP Billiton and Rio Tinto.
Due to the limited number of suppliers, the Japanese steelmakers
were forced to accept sharp price hikes, of 65 pct by Vale and up to 96.5
pct by the two Anglo-Australian miners, in negotiations for purchases in
this fiscal year through March 2009.
As BHP Billiton is planning to acquire Rio Tinto, a move to promote
oligopoly in the industry, Japanese firms have been actively looking for new
suppliers.