Itochu Corp. said it will double coal shipments in the next five years as new mine investments and marketing agreements help Japan’s fourth-largest trader meet rising demand from China, India and Southeast Asia.
Annual shipments will probably jump to between 22 million metric tons and 24 million tons by the year ending March 2016, Koichi Kawaguchi, general manager at the company’s coal department, said in an interview. Sales to overseas customers will account for half of the total, compared with 10 percent now, he said.
Itochu is seeking to buy at least 20 percent of the Maules Creek coal project in New South Wales, and this year invested in a Mongolian coal trader. China last year imported a record amount of coking coal, used for steelmaking, and India almost doubled purchases of energy coal for its power stations.
“Purchasing the resource is a must,” said Jiro Iokibe, senior analyst at Daiwa Securities Capital Markets Co. in Tokyo. “China will likely rely on imports of coal as it can’t cover its needs from within the country.”
Itochu, behind Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. in market value, rose 1.5 percent to 694 yen as of the 3 p.m. close on the Tokyo Stock Exchange.
Mongolia, Mozambique
The Japanese trader plans to source 15 million tons of coal from mines it has stakes in by March 2016, almost double the 8 million tons in the last fiscal year. The company is seeking to invest in Mongolia and Mozambique, and it expects to secure supplies from Maules Creek and Xstrata Plc’s Wandoan thermal coal project in Queensland, Kawaguchi said.
A development decision on the A$6 billion ($5.3 billion) Wandoan project is due next year, Xstrata, the world’s largest exporter of energy coal, said Aug. 16. Itochu owns 12.5 percent of the project.
Itochu obtained exclusive negotiation rights to buy a stake in Maules Creek last week when it agreed to take a 2.75 percent stake in Aston Resources Ltd., an Australian coal developer. Production is slated to start in 2012 and about 11 million tons of coal annually will be produced in 2014, Kawaguchi said.
“The Japanese market has so far been the center of our business,” Kawaguchi said in Tokyo. “We will need to open up overseas markets.”
Itochu invested in Winsway Coking Coal Holdings Ltd., the largest shipper of Mongolian coal to China, with the purchase of $10 million of convertible debt in April to gain access to steelmaking coal.
Coking coal prices have risen twice this year as demand picked up with the global economic recovery. China became the world’s second-biggest buyer of the steelmaking material after importing a record 34.4 million tons in 2009. India’s thermal coal purchases jumped to about 60 million tons last year from about 30 million tons in 2008, according to Macquarie Group Ltd.
Profit at Itochu’s metals and mineral operations may more than double to 95 billion yen ($1.1 billion) for the year started April 1 because of higher commodity prices and rising sales of iron ore and coal, the company said Aug. 2 in a presentation. LINK
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