TOKYO -- The global trend away from coal has reached the steel industry, presenting a stark challenge for Japanese companies that rely on powerful coke-powered blast furnaces to produce high-performance products.
At the World Steel Association's annual meeting being held in Tokyo, Tata Steel Vice President Sunil Bhaskaran called on the industry to do more to reduce its environmental impact. The Indian steelmaker announced a technology last month that could slash carbon dioxide emissions from its European facilities by more than 50%.
Similarly, South Korea's Posco said it plans to use artificial intelligence to reduce the environmental burden of steel mill operations.
Steel accounts for about 30% of global CO2 emissions from industrial activity, the International Energy Agency says. The proportion is even higher in Japan, at around 40%. Japanese steelmakers are feeling particular pressure as investors increasingly focus on environmentally sustainable corporate practices. Their environmental measures, or lack thereof, can alienate investors or reduce product sales.
There are two ways to make steel; using blast furnaces fired by coke, or baked coal, to extract steel from iron ore, or using electric furnaces to melt scrap iron into fresh steel products. Electric furnaces produce just one-quarter of carbon emissions by coke-fueled blast furnaces.
China, which accounts for half of global steel output, is accelerating a shift away from blast furnaces.
Blast furnaces are expected to account for less than 60% of the country's total capacity, down from about 90% today, according to the Organization for Economic Cooperation and Development.
Yu Yong, chairman of Chinese steelmaker Hesteel Group, said last month pledged to lead environmental efforts. "The Chinese industry has focused on volume until now, but now quality will be the top priority," Yong said. Hesteel Group is the world's fourth-largest producer of crude steel. India and Southeast Asian economies are expected to adopt electric furnaces more swiftly as well.
But Japan is lagging behind. Last year, electric furnaces accounted for 28% of steel output capacity globally, but only 24% in Japan. Japanese producers have thrived by supplying high-quality steel used in automobiles and other applications -- and blast furnaces are essential in this production.
Companies like Nippon Steel & Sumitomo Metal, JFE Holdings unit JFE Steel and Kobe Steel are working to replace coke with hydrogen in blast furnaces, in partnership with the government's New Energy and Industrial Technology Development Organization. The technology, targeted for commercial use around 2030, is expected to slash carbon emissions by about 30%.
A series of energy-saving investments dating to the 1970s helped Japanese steelmakers achieve the highest energy efficiency. And some in Japan's industry are skeptical of the shift toward electric furnaces, citing the large amount of electricity they consume.
Japanese steelmakers struggle to showcase their efficient technologies, said Koji Kakigi, who chairs the Japan Iron and Steel Federation and leads JFE Steel as president. And they trail some European companies in pushing the use of hydrogen in blast furnaces. Swedish steelmaker SSAB is building such facilities with a major power company in the northern European country.
Nippon Steel logged a 35% on-year jump in net profit for the April-June period. Many investors hold onto steel stocks as a long-term investment. But even long-term investors could turn away if companies don't change how they communicate their efforts, says Soichi Nakajima of the Mitsubishi Research Institute.