Nippon Steel’s planned 2 million tonne-a-year electric arc furnace at its Yawata works could face higher costs and fuel supply risks if it relies on LNG-fired power, according to an October report by think tank Transition Asia.
Transition Asia estimates that electricity costs could reach about JPY 15,800 per tonne of steel at the March 2026 peak in spot LNG prices, compared with roughly JPY 6,400 under normal conditions. The calculation assumes all fuel is bought at the respective prices. Nippon Steel’s share of storage at the joint LNG terminal would cover about 11 days of uninterrupted power plant operation. In a year of exceptionally high gas prices, the additional cost could reach around JPY 16 billion, squeezing margins.
In June 2025, Japan’s Ministry of the Environment urged the project to align with national emissions-reduction targets, introduce decarbonisation technologies early and avoid locking in fossil fuel use. The ministry also called for consideration of operating restrictions or closure if no emissions-reduction pathway consistent with the UN climate goal — limiting the rise in global average temperature to below 2°C above pre-industrial levels — can be set for 2035, 2040 and 2050.
Transition Asia recommends comparing captive LNG generation with grid electricity supplemented by renewable power contracts. It forecasts that by 2030 Kyushu’s grid could be less carbon-intensive than the proposed plant.
Nippon Steel began construction of the Yawata conversion project in April 2026 as part of its strategy to produce high-grade steel using electric furnaces.
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