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Japanese trading firms snap up coal assets

World Coal,

A flurry of acquisitions of high-quality coal assets by Japanese trading firms could be a signal that the coal market – seemingly hitherto locked in a downward spiral – may have reached a turning point.

Reuters reported that some Japanese firms “at least” are betting a depressed coal market, where prices have halved in three years, may be bottoming out.

Despite weaker demand in markets such as China, demand for coal in Japan and emerging markets, such as India, is holding up well.

Japan imports around 200 million tpy of coal.

Recent acquisitions by Japanese trading firms include the first coal investment by Mistui & Co. in ten years. The company is purchasing a stake in a Mozambique mine operated by Brazil’s Vale, in which the trading firm has an indirect stake.

"The biggest reason for participating in the Moatize project is to retain excellent quality metallurgical coal that is scarce globally," Tetsuya Fukuda, general manager of Mitsui's coaldivision, said. "With the resource supercycle, we had been not able to buy any assets."

As prices remain around the US$70/t mark (down from over US$200/t at their peak), Reuters said the low prices were triggering interest in buying cheap assets in anticipation of an eventual market pick-up.

"If you are interested in buying assets - they're probably going to be more expensive in six months time from where they are today," said Michael Elliott, global mining and metals leader at EY.

“So it's an opportunity - can they get exposure to more volumes, potentially even better quality assets than they hold," he added.

Itochu Corp said this month it was interested in joining bidding for the giant Tavan Tolgoi coal project after Mongolia relaunched an international tender.

Joining the buying spree, Idemitsu Kosan Co. said in November it more than doubled its stake in Indonesian thermal coal miner PT Mitrabara Adiperdana. State-owned Japan Oil, Gas and Metals National Corp. has also invested in the early stages of Australian mines in recent months.

Edited from various sources by Sam Dodson

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