* Coking coal prices to hold in $150-200/T range
* U.S political uproar carries fresh risk
* Concerns over U.S. President Trump's protectionism
By Yuka Obayashi and Ritsuko Shimizu
TOKYO, May 23 Japan's top steelmaker Nippon
Steel & Sumitomo Metal is considering measures to
counter volatile coking coal prices, such as contracts of
varying lengths and seeking out supply sources outside of
Australia, its senior official said.
Japanese steelmakers have suffered heavy costs from surging
coking coal prices and were forced to scramble for alternative
supplies after Cyclone Debbie hit Australia in late March,
cutting rail lines to ports in the world's biggest coking coal
The price of the vital steelmaking ingredient has also been
unusually volatile over the last year, nearly quadrupling
between March and late November 2016, and halving by end-March
2017, before the cyclone sent prices higher again.
"Dealing with volatility in raw materials prices has been a
long-standing issue ... but with recent volatility, it has
become more important to smooth out price impact and secure
stable supply," Toshiharu Sakae, Nippon Steel's executive vice
president, told Reuters in an interview last week.
One way to do that is supply portfolio management, he said,
possibly taking up one-, three-, and six-month or annual term
deals, instead of just buying coking coal on a quarterly basis.
Other options are buying lower quality coals, procuring more
supply from areas such as North America, Mozambique, Russia and
Mongolia, and investing in mines, he said. Russian mines could
possibly be a target, he added.
"It's not ideal for our sources to be so concentrated in
In 2016, Japanese steelmakers bought about 71 percent of the
59.9 million tonnes of coking coal they consumed from Australia.
Sakae said coking coal prices should stay at $150-$200 a
tonne based on supply and demand fundamentals, with iron ore
prices holding around $60-$70 a tonne.
Negotiations between steel mills and coal producers to set
prices for the April-June quarter are continuing, but Nippon
Steel aims to settle this month, he said.
In April, Nippon Steel reported a 13 percent fall in
recurring profit for the year ended on March 31 due to higher
raw materials costs, and skipped issuing an earnings forecast
for the fiscal year just begun.
"The difference between April and now is a fresh fear over
the U.S. political uncertainty," Sakae said, pointing to the
potential impact on the global economy from the political uproar
that has engulfed the United States.
"It's our biggest concern."
A flurry of U.S. political controversies - including
President Donald Trump's firing of Federal Bureau of
Investigation director James Comey - has rattled financial
markets this month, and steel protectionism also seems to be
accelerating under Trump.
One worry is that U.S. protectionism could mean that steel
products with no other place to go will flow to Japan, he said.
(Reporting by Yuka Obayashi and Ritsuko Shimizu; Editing by Tom