Transition Asia welcomes Nippon Steel’s announcement on 30 May 2025 to invest JPY 868.7 billion (USD 6.08 billion) in expanding its electric arc furnace (EAF) capacity in Japan. The investment includes:

• Construction of a new EAF at Kyushu Works (Yawata Area) with a production capacity of 2 million tonnes per year 
• Installation of an additional EAF at Setouchi Works (Hirohata Area), expanding capacity by 0.5 million tonnes per year
• Modification and restart of an EAF at Yamaguchi Works (Shunan) with a capacity of 0.4 million tonnes per year

According to our research, EAF-based steel production emits significantly less carbon than conventional blast furnace methods—and emissions can be reduced even further if the furnaces are powered by 100% renewable electricity (See below figure). However, additional disclosure is needed to determine the announcement’s emissions reduction impact — particularly the energy sources powering these furnaces and the proportion of scrap and/or HBI (hot briquetted iron) they will use, which will have vast implications on the emission reduction impact. The carbon intensity of EAF operations varies significantly depending on whether they run on:

Figure: Carbon intensity per tonne by technology 

Source: TA analysis

We look forward to Nippon Steel outlining plans for renewable energy procurement and increased low-carbon inputs to fully realise the positive potential impact of these investments.

Lastly, Nippon Steel states in its press release that the clear catalyst for these investments was the Japanese government’s generous subsidy under the “2025-2029 Energy and Manufacturing Process Transformation Support Business (Business I (Steel))”, which will provide JPY 251.4 billion (USD 1.76 billion) in support. The importance of supportive government policies to provide incentives to BF-based steelmakers, in addition to EAF-based steelmakers cannot be stressed enough. Incentives must be provided for both the conversion and decommissioning of BF steelmaking assets, in addition to the expansion of existing EAF facilities.

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.