Masumi Suga and Tsuyoshi Inajima Tokyo

Glencore International’s agreed £39.1 billion (R467bn) takeover of Xstrata, making it the biggest thermal coal exporter, poses a new threat to Japanese utilities forced to buy more of the fuel after the Fukushima nuclear disaster.

Glencore, the largest publicly traded commodities supplier, produces about 20 million tons of power station coal and would boost output fivefold through an acquisition of Xstrata. Japan’s thermal coal imports will probably rise 3 percent to 104 million tons in 2012, according to Daiwa Capital Markets.

“The coal market will likely tighten because the merger accelerates market domination by suppliers,” said Hidetoshi Shioda, a senior analyst at SMBC Nikko Securities. “Japan will increase coal imports because of energy issues after the Fukushima accident.”

The top five thermal coal exporters, led by the combined company, would have about 30 percent of the global market after the deal, according to UBS. Japanese power companies, the second-biggest buyers of thermal coal, are forecast to pay near record prices for imports from Australia again this year as the Asian nation shifts away from nuclear energy following the Fukushima accident last March, the worst nuclear incident since Chernobyl in 1986.

“Fewer suppliers through merger and acquisition activities may oligopolise the market,” said Yuuki Sakurai, the chief executive at Fukoku Capital Management in Tokyo. There was a “possibility that the negotiation power of the utilities will weaken”, he said.

The merger would have little impact on coal imports into China because purchases were based on the price rather than the quality of the commodity, said Zhao Guodong, a Beijing-based spokesman at China Coal Technology and Engineering Group.

Chinese consumers would seek supplies from local producers should prices increase, overcoming transportation hurdles, he said.

The effect on Indian companies, too, would be minimal, said Narendra Nath Misra, the director at NTPC, India’s largest thermal power generator. The utility accounts for more than a third of the nation’s total coal imports.

“Our imports are very little compared with other countries,” Misra said yesterday. “I don’t foresee any cost increase for NTPC after this takeover.”

Japan, which imports almost all its coal, has boosted purchases 80 percent since 1990 and accounts for about 15 percent of the world’s total coal trade, according to a report by Enerdata last month. About 65 percent of its coal comes from Australia. – Bloomberg