Sumitomo Corporation’s coal business pursuing responsible and stable supply of energy
Japan / Australia / Russia / Mongolia / Indonesia / etc.
Through stable supply of resources
Both metallurgical coal used as raw material for steel production and steaming coal for energy use have been playing important role in the course of global economic development since the industrial revolution in the 18th century. Coal is expected to enjoy steady growth in demand mainly in emerging countries in the years to come, and to maintain its significance in the world's energy mix.
Under such a business environment, Sumitomo Corporation has established a comprehensive value chain from upstream to downstream in its coal business, contributing to supplying resources on a stable basis.
In the upstream value chain, Sumitomo Corporation holds mining rights in and operates four Australian coal mines including Clermont, Oaky Creek, Hail Creek, and Rolleston in partnership with major global mining groups such as Glencore and Rio Tinto. In total, we supply 6 million tons of metallurgical and steaming coal combined per annum through our joint ventures. Meanwhile in our mid-stream/downstream business, we operate the Chubu Coal Center in Yokkaichi-shi in Mie prefecture in partnership with Japan Transcity Corporation and Isewan Warehouse Corporation, Ltd. The coal center receives and stores coal transported by sea, which in turn is delivered by trucks and vessels to electric utilities and other coal users in the Chubu region. Going forward, we will aim to contribute to Japan's industry by launching a full value chain business for the supply of coal. At the same time, we also pursue our basic strategy of contributing to stable supplies of coal in Asia, where demand is expected to increase along with ongoing and future economic growth.
Our initiatives in Australia
During the 1980s, Sumitomo Corporation shifted the focus of its coal business from trading activities to direct investment in coal mines. Our participation in the coal mining business started in Australia. A major new investment was made in May 2014 to acquire majority interest in the already operating Clermont mine, with the ownership equally held by Sumitomo Corporation and Glencore. We are involved in the mine's operation. We now hold mining rights in Australia for four operating mines, as well as several more under joint exploration with Glencore and Rio Tinto. Our current strategic priorities are to ensure steady production at these operating mines and to examine and carry out development plans for undeveloped mines. We are also actively searching for new development projects, while regularly updating evaluations on the relative competitiveness of targets from a long-term view.
Exploring opportunities in Russia, Mongolia, and Indonesia
Sumitomo Corporation is also exploring opportunities for coal business in Russia, Mongolia, and Indonesia. One major region is Russia, where the company has a strong track record of importing coal produced in the country to Japan. We boast an annual trading volume of four million tons, one of the largest attained by Japanese companies. By leveraging our human networks and the capacity to gather information in the Russian coal industry, both of which are assets acquired in the course of achieving our track record, we are taking full-blown measures to achieve even further growth in the future. In addition to Russia, we are exploring opportunities to take part in new development projects in countries such as Mongolia and Indonesia.
Although these countries are less of an ideal environment for direct investment compared with Australia and North America, they offer many promising coal mines yet to be developed. While knowing that it may take some time to find reliable business partners and establish partnerships with both private and public sectors, we are endeavoring to foster our coal mining business in these countries into one of our future core businesses based on a long-range perspective.
Our midstream and downstream strategies of infrastructure development
Along with the steady growth in coal demand in emerging countries, momentum towards launching new coal mine projects is rising. The biggest issue that needs to be addressed in coal mine development is the inadequacy of port and railroad infrastructures needed for shipping coal output. A country cannot build or expand railroads and port facilities overnight as they are fundamental infrastructures that require a significant amount of construction funds. Given this situation, Sumitomo Corporation proactively takes part in establishing railroads and port facilities. Developing coal mines and railroads and port infrastructures as a package is also becoming imperative in emerging countries with natural resources such as Russia and Mongolia. In partnerships with both public and private sectors we are striving to promote such comprehensive development projects in emerging countries too.
Coal will maintain its significance as a global energy source for the time being, particularly in emerging regions. By expanding its coal business, Sumitomo Corporation will strive to ensure a stable supply of coal worldwide in order to contribute to the steady development of the global economy.
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