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Nippon Steel to invest in Canadian coal company; steelmaking coal offtake agreement

Nippon Steel Corporation and Canada-based Teck Resources Limited, the second largest producer of high-quality steelmaking coal in the world, have executed an investment agreement with certain other affiliates of each of Nippon Steel and Teck, pursuant to which Nippon Steel has agreed to acquire indirectly up to 10% of common shares, preferred shares and royalty interest in Elk Valley Resources Ltd. (EVR), which will be spun-off from Teck as an independent publicly-listed Canadian company and will own and operate the steelmaking coal business previously conducted by Teck.

The remainder of Teck’s business will be spun-off as the independent company Teck Metals, which will focus on base metals production. EVR will have an annual production capacity of 25~27 million tons in total from four mines.

Nippon Steel and EVR have agreed that concurrently with the completion of the Investment, they will enter into long-term coal offtake rights agreement, under which EVR will supply steelmaking coal to Nippon Steel.

Nippon Steel is striving to achieve carbon neutrality by multi-track technological developments, including hydrogen injection in blast furnaces, high-grade steel production in large size electric arc furnace, and DRI production by hydrogen (shaft furnace etc.).

Nippon Steel has conducted technological development to reduce CO2 emissions by injecting hydrogen into blast furnaces since 2008. To reduce CO2 emissions while securing stable and efficient iron production, the use of high-quality steelmaking coal is essential, because it is required to make high-strength cokes, which play important roles such as reducing CO2 emissions by improving reduction efficiency, securing enough space for hydrogen gas to penetrate in blast furnaces, and generating enough heat to melt and take iron out of blast furnaces in the hydrogen reduction process.



Top: Nippon Steel has been promoting R&D of three technologies to realize carbon neutral steelmaking process: Hydrogen Injection into blast furnace (BF) (outlined in red), high-grade steel production in large EAFs, and direct reduction with hydrogen. Bottom: To reduce CO2 emissions while securing stable and efficient iron production in hydrogen injection into the BF, it is essential to procure a stable supply of high-quality steelmaking coal

In order to address a concern that steelmaking coal production capacity may shrink in the future, since capital investment for fossil fuels, including coal, has been decreasing in a trend of pursuing carbon neutrality, Nippon Steel has decided to increase its investment in high-quality steelmaking coal, which it deems essential in pursuing its own carbon neutral strategy.

In addition to securing high-quality steelmaking coal, following completion of the investment and the acquisition by Nippon Steel of additional common shares of EVR to increase its interest, Nippon Steel will be able to consolidate EVR as an equity-method affiliate.

Through the investment, Nippon Steel expects to diversify its business portfolio to be more resilient to the changes in the external business environment. Furthermore, diversification of Nippon Steel business portfolio by increasing its interest in raw materials is also expected to contribute to higher consolidated earnings.

Toward the realization of carbon neutrality, Nippon Steel will focus on research and development and commercializing innovative technology ahead of other countries. For securing essential funds for R&D and capital investment, Nippon Steel will seek to continue to build a more resilient business portfolio ranging from raw materials to steel production and trading, and to improve consolidated earnings by strengthening the profitability of each business.


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