Nippon Steel Corp. and other mills, facing a drop in profits as iron ore prices double, should boost investment in overseas resource projects and pursue mergers to secure supplies at lower cost, a government official said Tuesday.
Steelmakers need to work with trading houses to diversify supply, including through development of low-grade ores, increase spending on exploration and tie up with mining firms, said Masaki Ishikawa, director of the iron and steel division at the Ministry of Economy, Trade and Industry.
Japanese mills accepted a 97 percent rise in iron ore prices from BHP Billiton Ltd. and Rio Tinto Group after a similar deal was reached with China's Baosteel Group Corp. The increase outpaced a 65 percent gain agreed on with Brazil's Cia. Vale do Rio Doce. Nippon Steel, the world's second-biggest steelmaker, forecasts a 41 percent drop in profit this year on rising costs.