Sumitomo Corp. to Invest for Steel Raw Material Resources

Sumitomo Corporation plans to increase capital expenditure for steelmaking material including iron ore and metallurgical coal. The firm passed on many investment opportunities when such opportunities cannot clear the firm’s criteria under surging commodity price. Mr. Toru Furihata, general manager of mineral resources division No2, sees the lower commodity and assets price provides better opportunities for the investment. The firm plans to take the prime assets after iron ore asset in South Africa and coal in Australia.

Sumitomo Corporation estimates the price of steel raw material was overvalued in first half of 2008. The price trend is unforeseeable in the short term but the firm expects mineral resources price could be in a range of reasonable price to reflect cost and other factors in long term. The firm expects the sustainable price is around US$ 60-70 per tonne for iron ore and US$ 150 for coking coal depending on the quality and foreign exchange rate. The firm tries to acquire resource asset with long term competitiveness including quality and volume.

The firm sees such asset price decreases recently near to the level enough to clear the firm’s investment screening while many asset price was well above the criteria before. Mr. Furihata said the firm can acquire prime asset only in slump of economy and industry. The firm tries to find the timing to acquire such limited assets.

Sumitomo Corporation expanded the resources base for steel raw material at relative lower cost in 5 years despite of the surging commodity price. Mr. Furihata said the firm now has the core assets to expand the base for next growth including expansion of existing assets and acquisition of new resources.

Sumitomo Corporation increased the interest in Assmang, major mining company in South Africa, to around 13% from around 8% for 30 billion yen in first half year to September. The firm expanded the equity resources through the investment in major mining company with lump based high quality iron ore and world top class quality and volume of manganese ore resources. The firm increases the equity coal to 10 million tonnes in 5-6 years from current 5 million tonnes by developing Australian largest class new coal mine and by acquiring new assets.