Japan's Steel Giant Wants $17 Billion in Carbon Reduction Aid

Hideo Suzuki, the managing executive officer leading Nippon Steel's net-zero project, says the company needs the money to compete on an "even basis." Business estimates that decarbonization facilities will cost up to 5 trillion yen to develop by 2050.

Suzuki added that Chinese competitors, which currently manufacture more than half of all steel in the world, will pose a greater danger to Japanese companies without the financial boost than American companies without the centralized government's enormous investment.

Suzuki stated in an interview earlier this week that "China has strong leadership, power, and ample cash." "As a competitor, they're a formidable force."

An example of the challenges governments encounter when committing their industry to tight net-zero standards is what Nippon Steel is demanding of Japan. As of 2050, BloombergNEF estimates that the world's steel sector alone would require a capital investment of $215 to $278 billion.

Pressure is mounting.

A lot of big companies, like China Baowu Steel and ArcelorMittal SA, are trying to make green steel. They want to be carbon neutral by the middle of this century.

Suzuki added that over the next five years, Nippon Steel expects to spend 1 trillion yen on research and development alone. On China Baowu alone, Beijing provides more than four times as much in government subsidies as Japan's total steel sector receives.

Thus far, Nippon Steel has received only a quarter of the funding it requested from Japan. Research and development of net-zero steel would get 193.5 billion yen over ten years from Japan's 2 trillion yen green fund, according to Suzuki's announcement.

There is a lot of money involved in achieving carbon neutrality, says Takeshi Hashimori, deputy head of the metal industries section at the Japanese Ministry of Economy, Trade, and Industry. It is the government's goal to make sure that R&D and investment in facilities get the attention and support they need.

Global suppliers are under pressure to create new technology, including the use of hydrogen as an alternative to coal as the primary feedstock and fuel for steel manufacturing. Carbon dioxide emissions from the manufacturing sector account for 15% of the total in Japan and China and 7% of the total globally.

Suzuki, on the other hand, says that Nippon Steel doesn't want to work with Chinese companies to come up with new ways to remove carbon dioxide from the air.

Does that make any sense at all?

In at least some cases, the request for financing was not convincing enough. Jefferies Japan Ltd. analyst Thanh Ha Pham thinks it's not worth it for Japan to keep making a lot of steel because most of it is exported.

Was it really necessary to use such expensive hydrogen to achieve this goal? ", said Thanh Ha. There are regions outside of Japan where hydrogen can be generated with lower-cost renewable energy sources, such as Australia and Africa, where "hydrogen-based steelmaking will be more appropriate."

For more than a century, Nippon Steel has been using mined iron and coal to produce steel in blast furnaces. At least 4 trillion yen to 5 trillion yen in new facilities will be needed for breakthroughs in decarbonization over the next 30 years, which may quadruple the cost of steel.

The corporation has set a goal of zero emissions by 2020 as part of a commitment to reduce emissions by 30 percent by 2030. Additionally, the company plans to increase the use of hydrogen in existing furnaces and to remelt steel scrap in electric arc furnaces.