Japan: Nippon Steel draws up over $6 billion investments for EAFs to reduce carbon emissions

• Production to commence at three EAFs by April 2029
• Cost escalation key challenge for steelmaker in green transition

Steel major Nippon Steel has been selected for the ‘2025-2029 Energy and Manufacturing Process Transformation Support Business (Business/(Steel)’ based on the Japanese government’s Green Transformation (GX) Promotion Act, the company stated in a press release published yesterday.

Nippon Steel would invest JPY 868.7 billion, equivalent to $6.02 billion, to establish three electric furnaces (EAFs) in Japan and it expects the Japanese government to provide up to JPY 251.4 billion in support.

As part of the total investment, an approximately 2 mnt/year EAF will come up at the company’s Kyushu Works. While the 0.5 mnt EAF at the Setouchi Works will be further expanded, the 0.4 mnt furnace at the Yamaguchi Works will be modified and restarted. The dates for commencement of production from these three furnaces have been fixed between H2 of fiscal year 2028 and H2 of fiscal year 2029.

Decarbonisation strategies

Nippon Steel aims to reduce its CO2 emissions by 30% from 2013 levels by 2030 and achieve carbon neutrality by 2050.

In March 2021, Nippon Steel announced to achieve carbon neutrality with the use of the three breakthrough technologies: a) high-grade steel production in large-sized electric arc furnaces, b) production of direct reduced iron using hydrogen, and c) hydrogen injection into blast furnaces.

Challenges ahead

According to the company, although the gradual transition from BFs to EAFs would significantly reduce CO2 emissions from steel production, it would require substantial capital investment and lead to considerable increases in production costs, including costs for raw materials and electricity.

In addition to the government-supported business that Nippon Steel was recently selected for, establishing a robust green steel market in which CO2 reduction values are properly compensated is a significant challenge in ensuring the predictability of investments.

Nippon Steel has proposed measures involving both the public and private sectors to help develop and grow the market for green steel through procurement of low-emissions products and services and expansion of demand for green products.