Nippon Steel says can find alternatives for raw material it buys from Ukraine, Russia

FILE PHOTO: A chimney of Nippon Steel & Sumitomo Metal Corp.
FILE PHOTO: A chimney of Nippon Steel & Sumitomo Metal Corp.'s Kimitsu steel plant is pictured in Kimitsu, Chiba Prefecture, Japan, May 31, 2018. REUTERS/Kim Kyung-Hoon

By Yuka Obayashi and Ritsuko Shimizu

TOKYO (Reuters) - Japan's biggest steelmaker Nippon Steel Corp will be able to secure alternatives for a raw material that it buys from Russia and Ukraine in the event of any supply disruptions amid tensions in Eastern Europe, a company senior executive said.

Russia launched an all-out invasion of Ukraine by land, air and sea on Thursday, hours after President Vladimir Putin said he had authorised "a special military operation" to eliminate what he called a serious threat.

Nippon Steel, the world's fifth-biggest steelmaker, buys 14% of its iron ore pellets, small balls of iron ore powder used in steel production, from Russia and Ukraine.

"We are taking measures... to secure alternatives for the iron ore pellets," Takahiro Mori, executive vice president, told Reuters on Tuesday.

"But we expect little impact as we have decided to switch supply sources to Brazil and Australia in the event of a crisis," he said.

Still, any disruption in steel exports from Russia and Ukraine could bolster global steel prices as the two countries have a solid presence as exporters, Mori said.

For Nippon Steel, bigger export opportunities and higher steel prices could help boost its profits, but the conflict could also have a negative impact on the global economy, he said.

"We have to keep a close eye on the development as we don't know which way it will swing," Mori said.

Nippon Steel has forecast its business profit will jump to 800 billion yen ($6.98 billion) for the year to March 31, from 110 billion yen a year earlier, including 230 billion yen of appraisal gains on inventory.

For the next year, it aims to at least maintain its business profit of 600 billion yen, excluding one-off factors, Mori said.

"Steel demand will likely increase as the global economy picks up from the pandemic-induced slump," Mori said.

($1 = 114.6700 yen)

(Reporting by Yuka Obayashi; Editing by Kim Coghill)

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