2023 Sustainability Report Updates for Nippon Steel, JFE Holdings and Kobe Steel
Developments are unfolding in Japan’s steel industry in regards to their efforts toward decarbonisation. However, there is still a long way to go to align with a 1.5°C pathway,as Japan’s Big Three steelmakers (Nippon Steel, JFE Holdings and Kobe Steel) are delayed in making the needed shift to Electric Arc Furnace (EAF) and Hydrogen Direct Reduced Iron (H2-DRI) technology. The total emissions and emissions intensity remain stagnant overall, with absolute emission reductions being driven through decreases in output. While the decreases in output are material, all three companies’ emissions reduction progress and trajectories remain critically misaligned to a 1.5°C pathway. Some steps have been taken, particularly in terms of technical shifts such as more DRI & scrap usage with EAFs. Some announcements have also been made for the production of ‘reduced emissions steel’.
The sustainability report1 indicates that emissions are steadily getting closer to the 2030 target of 75 million tons, which represents a 30 percent decrease from 2013. However this trend is driven by the reduction in production volume rather than actual emission reduction initiatives. Nippon Steel’s emissions intensity remains stagnant, as evidenced below.
|Energy Consumption (PJ)||1,044||854||957||864|
|Emissions (million tons)||90.675||74.045||83.778||75.309|
Note: All figures are non-consolidated
The sustainability report details three main ways in which Nippon will seek to reduce emissions from their domestic steel production, COURSE50, H2-DRI and EAFs.
1. COURSE 50
COURSE 50 is the Japanese Steel industry’s flagship project incorporating carbon capture and hydrogen injection into blast furnaces (BFs). COURSE 50 has a maximum theoretical CO2 reduction potential of 30 percent compared to a BF. Nippon Steel’s pilot project in Kimitsu is set to commence in 2025 with installation to be completed by 2030. However, it is unclear if this marks the full commercialisation of the project or not. There are also unanswered questions surrounding CAPEX and OPEX requirements for this technology. Although overall investment figures for reaching carbon neutrality of overall operations of Nippon Steel have been estimated at 4-5 trillion yen.
The installation of a DRI shaft is planned for 2025 – demonstration tests will begin in 2027. There is no clarification over the commercialisation of a DRI-EAF pathway.
An extremely small 10t-class experimental EAF is scheduled for installation in 2024.
JFE has set targets for emissions reduction, aiming for an 18 percent reduction in 2024 and above 30 percent in 2030. JFE’s 2024 CO2e emissions target is 47.6 million tonnes in 2024 and 40.7 tonnes in 2030. This year’s emissions disclosure indicates, as with previous years, that JFE Steel is falling significantly short of these targets. Furthermore, these targets are not 1.5°C aligned.
|Energy Consumption (PJ)||620||545||602||581|
|Emissions (million tons)||54.2||47.3||52.6||50.4|
|Production (million tons)*||26.73||22.76||25.88||24.10|
Note: All data above is from JFE Steel
* JFE Steel (non-consolidated)3
JFE has identified seven BFs with annual production of 25 million tonnes of crude steel to be replaced by three different technologies, carbon recycling within BFs, DRI and EAFs4. Currently all three of these technologies are being developed as small-scale R&D projects. At the point of full scale implementation toward 2030, JFE has not alluded to the proportional composition these three technologies will take in their steel portfolio.
1. Carbon Recycling
JFE ’s carbon recycling technology is for use within existing BFs. Emission reductions are hoped to be 50 percent compared to regular BF iron although it is important to note that trial operations have not begun on the small pilot BF. This will begin in 2025-2026. Implementation of this technology in a medium sized BF is planned for 2030.
A DRI project is being developed with initial testing of this pilot project planned for 2024. Although this R&D project is referred to as an H2-DRI project, the DRI shaft will utilise methane produced from a methanisation plant and is not a pure play Hydrogen-DRI facility. The carbon for this methanisation plant will be supplied via captured off-gases from the DRI shaft, hydrogen will be supplied externally.
Significantly, JFE has announced two EAF expansion projects in Kurashiki (high- quality steel sheet, EAF refurbished from 2027-2030) and in Sendai (upgrading the existing furnace in 2024, low-quality steel products). These projects are hoped to contribute emission reductions of 100,000tCO2e and 3,000,000tCO2e per year respectively. A small 10t test EAF is also planned for testing within 2024.
4. Lastly, JFE has entered into an off-take contract for purchasing fossil methane-based DRI. This DRI will then be exported to other regions for use in EAFs.
Similar to other steelmakers, Kobe Steel’s emissions and intensity has remained stagnant over the years since they began disclosing.
|Energy Consumption (PJ)||–||182||192||187|
|Emissions (million tons)||–||15.4||16.1||15.6|
|Production (million tons)(incl. Rolled products not only crude steel)||–||6.3||7.2||6.7|
Note: All figures are consolidated
Kobe Steel has not provided any amendment in the decarbonisation roadmap or other strategies, largely relying on “low-carbon” products, without a defined definition.
Japanese steel company commitments to produce reduced emissions steel by industry
|Company||Auto||Shipbuilding||Construction||Planned Total Volume of Supply|
|Kobe Steel||Engine parts for Toyota’s racing car||Bulk Carrier by Imabari Shipbuilding||Property by IHI, Mitsubishi Estate and Kashima Construction||8k t (FY 2022)1m t (2030)Cf. Nikkei|
|JFE||No Announcement Yet||Dry Bulk Carrier for 8 customers||Office property by Sumitomo Corp & Kumagai||200k t (FY2023)|
|Nippon Steel||Commercial vehicle’s container for Atago||No Announcement Yet||Geothermal power project in Netherlands||300k t (FY 2023)|
Note: all ‘reduced emission products’ are managed based on the ‘mass-balanced method’ and those products include ones produced with BF, different from how we define ‘green steel’.
The three sustainability reports demonstrate that despite public claims, none of the steel companies are reducing emissions in line with a meaningful trajectory. And most notably, where they have reduced emissions, this has been via reduced steel production. Although all three steel companies have proven and cutting edge low-carbon steel technology within their production or investment portfolios, plans to expand these technologies are stagnant. Furthermore, where the majority of major global steel industry players are collectively choosing H2-DRI as the technology of the future, Nippon Steel, JFE Steel and Kobe Steel demonstrate hesitation. Instead, these technologies are resigned to being developed as small scale R&D projects despite H2-DRI and EAF being commercially available.
Transition Asia’s upcoming report (to be released Nov. 1) on low-carbon steel development dives deeper into what these current choices mean for these three companies emissions pathways in the medium term towards 2030, and further to 2050. Where misalignment to a 1.5°C pathway occurs, we have modelled 1.5°C aligned technology pathways.
- Nippon Steel 2023 Sustainability Report
- Nippon Steel 2023 Factbook
- JFE Group Report 2023
- JFE Steel Corporation Carbon Neutrality Strategy Briefing September 1, 2022
- Emissions are calculated on a consolidated basis and production volumes include rolled products, therefore the emissions intensity on a non-consolidated basis which is divided by the volume of crude steel production is supposed to be higher than the figures in the table above but it is not disclosed by Kobe Steel.
Data and Disclaimer
This analysis is for informational purposes only and does not constitute investment advice, and should not be relied upon to make any investment decision. The briefing represents the authors’ views and interpretations of publicly available information that is self-reported by the companies assessed. References are provided for company reporting but the authors did not seek to validate the public self-reported information provided by those companies. Therefore, the authors cannot guarantee the factual accuracy of all information presented in this briefing. The authors and Transition Asia expressly assume no liability for information used or published by third parties with reference to this report.
Program Manager and Investor Lead