Japan's JFE aims to widen coking coal sources after cyclone

2017-05-18 17:15:00 Company,  International,  Coking Coal Reuters.com

JFE Holdings Inc, Japan's second-biggest steelmaker, aims to buy more coking coal outside of Australia to offset price risks for the steel ingredient that were made evident by a big cyclone in March, Reuters reported on May 17, citing the company's president.

"The biggest reason for volatility of coking coal prices is geographic risk, with a major part of global production coming from the east coast of Australia," JFE President Eiji Hayashida expressed. "We want to diversify our procurement sources to areas including Mozambique, Russia and Canada."

The price of coking coal has been volatile for more than a year, nearly quadrupling between March and late November 2016, and then halving over the next four months to end-March 2017.

March brought a new twist, though, when Cyclone Debbie hit eastern Australia, cutting rail lines in the world's biggest coking coal export region and sending prices gyrating up and down once again in April.

Japanese steelmakers, which bought 71% of the 59.9 million tonnes of coking coal they consumed in 2016 from Australia, were forced to scramble to get material from the United States, Canada and China to replace supply lost or delayed due to the cyclone.

Hayashida said miners in Australia needed to be better prepared for the cyclones that frequently hit the area.

"We strongly hope that miners will make more efforts, such as reinforcing infrastructure, to mitigate impacts from natural disasters," he said.

Five miners in the cyclone-hit region, including BHP , and Glencore had to invoke force majeure as multiple landslides and flooding knocked out major coal rail networks.

Most rail links have been restored, but vessels loading coal from Australia's Bowen Basin could be facing delay for another couple of months before shipments return to normal.

Hayashida also said JFE was still set to build a steel plant in Mexico with U.S. company Nucor Corp, although it is closely watching U.S. policy because of President Donald Trump's threats to tear up a regional trade pact.

"To be honest, we have no idea what policy the U.S. government will adopt, but we may see a hard line given the current cabinet members related to trade," Hayashida said.

(Writing by Becky Du   Editing by Harry Huo)
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