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

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.