Introduction and Executive Summary

JFE published its Long-Term Vision and Eighth Medium-term Business Plan in 2025, followed by several operational updates intended to implement these strategies. However, many of the critical concerns such as better disclosure and technology aligned with climate goals, previously identified in Transition Asia’s AGM Information Packs remain. Ahead of the upcoming AGM, this piece reviews JFE’s recent progress in decarbonisation efforts and pinpoints any potential risks associated with the current trajectory.

Progress on Decarbonisation

JFE reported a 23% reduction in GHG emissions for FY2024 (relative to FY2013).¹ Under its Long-term Vision and Eighth Medium-term Business Plan, the company has committed to a 24% reduction by FY2027 and a target of 30% or more by FY2030. As noted in previous reporting, the primary driver has been an 8-million-tonne reduction (between FY2013 and FY2024) resulting from production cuts rather than gains in energy conservation or technological efficiency.² This suggests that JFE’s progress to date is largely a byproduct of reduced operational scale rather than a technological change removing carbon from production. To pivot toward technology-led reductions, JFE has been restructuring its production by reducing its blast furnace (BF) count from seven to five and commissioning an “innovative” Electric Arc Furnace (EAF) by 2028.³ The company projects that 4 million tonnes of reductions will come specifically from energy conservation and technology development, signaling a shift from its previous reliance on volume reduction, in order to meet its FY2030 target.⁴

In its FY2025 IR materials, JFE outlined capital investments up to JPY 100 billion (USD 629 million⁵) investment in carbon neutrality efforts over the next three years. The priorities include expanding scrap utilisation and use of direct-reduced iron (DRI), transitioning to EAFs for stainless steel production at the East Japan Works (Chiba) and renewing coke ovens at the West Japan Works (Fukuyama), and bringing online the “innovative” EAF by 2028.⁶

While Figure 1 suggests JFE is on track to meet its near-term commitments against the BAU forecast, it is critical to emphasise that these reductions are currently driven by decreased operational scale rather than structural decarbonisation. Additionally, due to JFE not disclosing emissions from global assets, investors and other stakeholders are unable to map out an emissions trajectory that reflects the global emissions trajectory of JFE. This reliance on production cuts raises significant concerns about the feasibility of maintaining this trajectory post-2040 when deep technological interventions will be required.

Figure 1. JFE Emissions Trajectory Under BAU and Corporate Targets (Japan Only)

Source: JFE, TA analysis⁷

Note: All figures are non-consolidated

Progress on Decarbonisation Initiatives and Technologies

1. Expanding Use of Scrap

JFE has established a key performance indicator (KPI) for FY2025 to double the collection and utilisation of “return scrap”, high-grade scrap generated during the steelmaking process, compared to the average volume recorded under the Seventh Medium-term Business Plan.⁸

2. Carbon Recycling:

JFE is still in the pilot phase of its “Super-Innovative” Carbon-Recycling BF, a JFE initiative aimed at reducing CO₂ emissions by 50% or more compared to conventional BF operations. This technological pathway relies on the high-volume injection of oxygen and e-methane, integrated with methanation facilities to recycle carbon within the steelmaking process. Operational testing for this integrated technology is scheduled to continue through FY2025–2026.⁹ There have been no notable updates since disclosure published in May 2025.

3. Use of Direct Reduced Iron (DRI):

JFE anticipates a shortage of scrap availability in the future, and has started studying the use of DRI as a way to supplement the lack of scrap to produce high-quality steel with an EAF. Since 2024, JFE has been operating small-scale pilot shaft furnaces (15kg/h) and has successfully demonstrated continuous DRI production using 100% hydrogen and low-grade pellets. However, there has been no recent update on the scaling of this technology. While JFE entered into a MoU with BHP in 2021 to jointly study options involving the use of BF and DRI in steelmaking, the update of the study remains unclear.¹⁰

The MoU signed in 2023 with Itochu and Emirates Steel (EMSTEEL), intended to secure a supply of ferrous raw material for green ironmaking from the UAE, remains a critical component of its emissions reduction strategy. Originally intended to secure a stable supply of low-carbon ferrous raw materials from the UAE, the agreement targeted up to 2.5 million tonnes of DRI per year to support the Kurashiki District’s EAF operations by FY2028.^{11 12} However, JFE disclosed in an announcement in May 2025 that it will instead begin utilising DRI at the East Japan Works (Chiba) starting in FY2028.¹³ Notably, this DRI will initially be used to supplement BF operations rather than shifting directly to an EAF route, suggesting a more incremental approach to emissions reduction than previously anticipated.

4. EAF Stainless Steel Progress at Chiba:

In April 2026, JFE began operations on its new 70 tonne No.4 EAF at its East Japan Works (Chiba), which will have up to 300,000 tonne/year scrap melting capacity and up to 450,000 tonnes/year of GHG emissions reduction effect.¹⁴ The plant will produce stainless steel by using internally generated scrap and molten iron from a BF as raw material inputs, reducing GHG emissions that usually come from virgin raw material. The capital investment was approximately JPY18 billion (USD 113.2 million).¹⁵

5. Innovative EAF Progress:

JFE is advancing its “innovative” EAF at the Kurashiki District, which features a planned annual capacity of approximately 2 million tonnes. This requires a large capital commitment of around JPY 329.4 billion (USD 2.07 billion ), a third of which will be covered by subsidies from the Ministry of Economy, Trade and Industry (METI).¹⁶ Furthermore in March 2026, it was announced that Japan’s GX Promotion Organisation (GX Agency), acting under METI, will provide debt guarantees of up to JPY180 billion for loans sourced from private financial institutions, which is equivalent to 50-80% of the loan.¹⁷

The innovative EAF in Kurashiki is key to JFE’s FY2030 goal of 3 million tonnes of green steel, as it has the capacity for 2 million tonnes, but JFE notes reaching this target will include “conventional green-steel products allocated a GHG emission-reduction amount achieved with GHG-reduction technologies.”

This means a substantial portioin of JFE’s “green steel” products will rely on accounting-based emission transfers rather than an absolute emissions reduction through low-emission steel production technologies and methods. The global acceptance and certification of these accounting methods are currently being debated in major markets, and there is a possibility JFE’s approach may be unrecognised, risking its ability to maintain global shares.

Notable Developments in FY2025:

• Development of JFE’s GX Steel product: JFE has accelerated the commercialisation of its “JGreeX^TM” green steel brand through high-profile offtake agreements with major Japanese industrial leaders. In a notable expansion of its automotive portfolio, Toyota announced the integration of JGreeX^TM into its production in November 2025, followed by Nissan’s confirmation that its new “Leaf” EV model will utilise the low-carbon material starting in January 2026.^{18 19} Furthermore, in April 2026, JFE entered a MOU with Amazon Web Services (AWS) focused on data centre decarbonisation.²⁰ This press release states that the partnership will cover the procurement of steel from the innovative EAF at Kurashiki starting in FY2028, while also preparing for steel production utilising carbon-recycling BF and hydrogen-based direct reduction processes, both of which are supported by the Green Innovation Fund.
• In April 2026, JFE announced a strategic restructuring of its sheet steel production operations, specifically involving the consolidation of the Keihin district’s operations into other regions. This was followed by a subsequent announcement in May 2026 outlining the restructuring of its shape steel business, effective April 2027, whereby the Fukuyama district’s shape steel operations will be transferred to JFE Bars & Shapes Corporation, an EAF steelmaker.^{21 22} This is in response to declining domestic demand, particularly within the construction and civil engineering sectors, which continue to face significant headwinds from rising labor costs and increased material prices.
• The results of the FY2025 earnings report show that the change in production volume may not be the only driving factor for the slump in profit. Instead, this  suggests that the revenue and profit sensitivity could be driven by price compression, likely due to commodity-grade products, which JFE has stated have been negatively impacted by raw material price fluctuations and oversupply from competing markets.²³ While further disclosure is required to confirm the drivers of revenue decline, this strengthens the economic case for reallocating capital and production capacity toward green and high-grade steels, which may offer greater pricing power and reduced exposure to international export competition.²⁴

Potential Gaps in JFE’s Decarbonisation Strategy

• Target Setting: As a follow-up to last year’s info pack, JFE has yet to update a groupwide Scope 3 emissions target. As JFE expands its global footprint, particularly in India, it must ensure that international operations are backed by transparent disclosures and commitments.
• Executive Remuneration: Compared to other BF steelmakers in Japan, JFE has taken a step towards global best practice by tying executive pay to climate change indicators. As mentioned in last year’s info pack, however, this can be further improved by having more ambitious KPIs.²⁵ For instance, it will be worth considering incorporating intensity-based targets into the remuneration scheme, in addition to the current indicators which are simply linked to the total emissions.^{26 27}
• Climate Policy Engagement: JFE should advocate for and adopt green steel definitions that prioritise physical emission reductions over accounting-based methods. As a member of the Japan Iron and Steel Federation (JISF), JFE could advocate for alignment with global standards, rather than a Japan-specific approach, in order to maintain and develop global competitiveness.
• Investments in Carbon Lock In: In collaboration with JSW Steel in India, JFE has plans to invest JPY 270 billion (USD 1.7 billion) in a joint venture to own an iron ore mine and an integrated steelworks in eastern India that has a crude steel production capacity of 4.5 million tonnes per year.²⁸ JFE is reportedly targeting a 15-million tonne capacity, and may invest more in the future, including in BF.²⁹ Despite lowering emissions in JFE’s domestic production and transitioning to EAFs, it is worth noting that this investment goes against global movement towards decarbonisation and could reinforce India’s steel industry reliance on BF in the near future.

Key Actions Required for Future Decarbonisation

JFE’s decarbonisation strategy could further incorporate physical linkages between emissions reduction and final products to ensure product credibility, such as for JGreeX^TM, as companies begin to procure low-emission steel based on absolute metrics in an increasingly green, global market.The March 2026 power suspension at the Fukuyama power plant, caused by procurement challenges during the Strait of Hormuz blockade, is a timely example of just how relying on fossil fuels for power generation keeps JFE vulnerable to geopolitical changes, even when alternative energy pathways exist.³⁰ To safeguard against such volatility, JFE can accelerate its transition to non-fossil energy sources, mirroring the ambitious renewable KPIs currently set for its engineering division, which has a goal of 90% or more non-fossil fuel electricity.³¹

Furthermore, as JFE expands its global footprint in emerging markets like India, it is imperative that these investments are accompanied by transparent Scope 3 commitments and robust disclosures. Focusing on providing high-grade steel materialised by investments in the “innovative” EAF may provide the opportunity for JFE to distinguish itself from cheaper, lower quality steel competitors in the global market while also shifting reliance on BF-made goods.

The success of JFE’s decarbonisation strategy will depend on leveraging its EAF and low-carbon investments to provide products that align with evolving global benchmarks and conditions.

1. https://www.jfe-holdings.co.jp/en/common/pdf/investor/management/plan/2024-chuukie.pdf
2. https://www.jfe-holdings.co.jp/common/pdf/investor/climate/environmental-management-strategy250529-01.pdf
3. https://azcms.ir-service.net/DATA/5411/ir/140120260507518785.pdf
4. https://www.jfe-holdings.co.jp/common/pdf/investor/climate/environmental-management-strategy250529-01.pdf
5. Unless otherwise stated, all currency conversions in this paper are based on the exchange rate as of 29 May 2026, where USD 1 = JPY 159.
6. https://www.jfe-holdings.co.jp/en/common/pdf/investor/management/plan/2024-chuukie.pdf

7. The emissions trajectory and corporate targets presented in this analysis exclude JFE’s international investments and joint ventures (e.g., JSW Steel in India), as these are not covered within the company’s primary GHG reporting boundary.

8. https://www.jfe-holdings.co.jp/en/common/pdf/sustainability/sus/materiality/2025_kpi.pdf
9. https://www.jfe-holdings.co.jp/investor/climate/
10. https://www.jfe-steel.co.jp/en/release/2021/210210.html
11. https://www.jfe-holdings.co.jp/en/sustainability/environment/climate/
12. https://www.jfe-steel.co.jp/en/release/2023/230718.html
13. https://www.japanmetaldaily.com/articles/-/239639
14. https://www.japanmetaldaily.com/articles/-/259261
15. https://www.jfe-steel.co.jp/release/2026/04/260430.html
16. https://www.jfe-holdings.co.jp/en/common/pdf/investor/management/plan/2024-chuukie.pdf
17. https://www.nikkei.com/article/DGXZQOUA191IN0Z10C26A3000000/
18. https://www.jfe-steel.co.jp/release/2025/11/251111.html
19. https://www.jfe-steel.co.jp/release/2026/01/260129.html
20. https://www.jfe-steel.co.jp/en/release/2026/04/260427-1.html
21. https://www.jfe-steel.co.jp/en/release/2026/04/260402.pdf
22. https://www.jfe-steel.co.jp/en/release/2026/05/260508.html
23. https://azcms.ir-service.net/DATA/5411/ir/140120260507518913.pdf
24. https://www.jfe-holdings.co.jp/en/investor/library/
25. https://transitionasia.org/jfe-agm-2025-information-pack/
26. https://www.jfe-holdings.co.jp/en/release/2023/0329/000274/
27. https://transitionasia.org/jfe-agm-2025-information-pack/
28. https://www.jfe-steel.co.jp/en/release/2025/12/251203.html
29. https://asia.nikkei.com/business/companies/japan-s-jfe-to-double-india-steel-capacity-by-2030-on-infrastructure-demand
30. https://www.nikkei.com/article/DGXZQOUC18BGP0Y6A310C2000000/
31. https://www.jfe-holdings.co.jp/en/common/pdf/investor/library/group-report/2025/all.pdf

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.

Sala Tsuzuki

Japan Programme Officer

Kenta Kubokawa

Japan Lead

Akira Kanno

Research Analyst