JAPAN’S oldest steel mill is venturing into recycling the industrial metal to tackle climate change and survive a race with Chinese mills.

Nippon Steel Corp. has been making steel from mined iron and coal in blast furnaces for more than a century. But as competition heats up, president Eiji Hashimoto has called on his staff to examine an alternative process that recycles steel from scrap in an electric-arc furnace to cut costs and help it expand in emerging Asian economies.

Nippon Steel has so far distanced itself from electric-arc furnaces partly because of technological hurdles in making high-end steel even though its units and affiliates have used the technology. Electric-arc furnaces are estimated release only a fourth of the carbon dioxide compared with traditional furnaces, according to Tokyo Steel Manufacturing Co., Japan’s biggest maker of recycled steel.

With mills in top producer China catching up on technology and making inroads into Nippon’s key market of Southeast Asia, the company is looking to cleaner steel to cut costs and maintain its market share. The cost of building an electric-arc furnace is estimated at a 20th of a blast furnace, according to Tatsuya Kikkawa, an analyst at JP Morgan Securities Japan Co.

The use of electric-arc furnaces, which are cheaper to set up, “will enable the company to expand in many regions more flexibly and quickly,” said Kikkawa. “With scrap piling up more and more, the company intends to utilize the resource while curtailing initial investment in facilities.”

The world’s third-biggest steelmaker also plans to build an electric-arc furnace in western Japan to produce electrical steel, a critical material for electric vehicles’ motors. It will be its first attempt to make that variety in that type of furnace.

Developing expertise in recycling steel will also give Nippon Steel more options for overseas expansion as it seeks to compensate for a dim demand outlook in Japan, said Hashimoto.

(SD-Agencies)