NIPPON Steel Corp, the world's second-biggest maker of the metal, wants to invest in Cia Vale do Rio Doce's US$1.4 billion planned coal mine in Mozambique to provide raw materials as costs rise.

Tokyo-based Nippon Steel told Brazil's Vale, the world's biggest iron ore exporter, it's interested in the mine, said Shoji Muneoka, who became president last month. Coking coal prices tripled this year to a record.

"In this extraordinary circumstance of soaring material prices, we have great interest in alternative sources," he told Bloomberg News. "We like to invest if we have opportunities."

Nippon Steel expects profit to fall to a five-year low as it can't raise prices enough to cover higher material costs. Surging costs prompted ArcelorMittal, the world's largest steel maker, to buy stakes in mining assets.

"I don't think Nippon Steel's investment in resources will be big enough to give them bargaining power," said Takashi Murata, an analyst at Daiwa Institute of Research. "But it's better to have some resources themselves for secure supply."

Nippon Steel rose 2.03 percent to 703 yen (US$6.78) in Tokyo yesterday. The company lost 1.9 trillion yen in market value since last year's high in July, leaving it vulnerable to a takeover, Muneoka said.

"It is possible any company outside Japan looking at our technology and customers will be interested in acquiring us, considering that our current market cap is far from satisfactory."

Nippon Steel, which got about 25 percent of its coal in 2006 from mines it partly owned, hasn't held "concrete talks" with Rio de Janeiro-based Vale, Muneoka said. Vale's spokeswoman Patricia Malavez did not comment. The Mozambique mine will cost US$1.4 billion to build, Vale said in an October statement. The mine may be the largest in the Southern Hemisphere and may start output in the first quarter of 2011, according to the statement.