Nippon Steel’s growing ambition a win for investors

The Australasian Centre for Corporate Responsibility (ACCR) is commenting on Nippon Steel Corporation’s announcement of a US$6.05 billion (¥868.7 billion) investment in electric arc furnace (EAF) technology for green and low-carbon steelmaking.

Alongside a further US$1.76 billion (¥251.4 billion) of funding from the Japanese government, the investment will support:

• construction of one EAF in the Kyushu Works Yawata Area
• expansion of an existing EAF in the Setouchi Works Hirohata Area
• the modification and restart of an EAF at the Yamaguchi Works Area.

The EAFs will produce around 2.9 million tonnes of steel per year and are expected to be operating by 2029.

The announcement comes after more than two years of extensive investor engagement with the company. In 2023, engagement from a core investor group – including Man Group, Storebrand Asset Management, Corporate Action Japan and ACCR – led the company to commence studying EAF conversion at the Kyushu and Setouchi Works areas.

Commenting on the announcement, Martin Norman, Investor Engagement Lead, ACCR, said:

“Nippon Steel’s investment into critical electric arc furnace infrastructure is a welcome signal that its ambitions for low-carbon steel production are ratcheting upwards, adding further momentum towards the green steel transformation.

“Local media^[1] suggest the expected emissions ‘reduction effect’ of the new and upgraded coal-free furnaces, when operating, would be 3.7 million tonnes of CO2 per year – close to Iceland’s annual emissions. While Nippon Steel’s decarbonisation strategy has room to improve, the number is significant, and if achieved, will significantly benefit shareholders and the climate.

“For institutional investors, this is a clear demonstration that strategic and ambitious engagement works. Through critical and constructive dialogue, investors can help drive material outcomes that support the rapid, real-world emissions reduction required to secure sustained shareholder value.

“Coal-free steelmaking technology is crucial as the steel sector readies itself for a future where low-carbon steel will become necessary for producers to remain competitive. By investing in electric arc furnaces, Nippon Steel has shown it is willing to back proven, commercially ready solutions with significant emissions reduction potential.”