The transition of the steel sector is challenging; its manufacture is highly carbon intensive and global demand is set to rise. Net-zero scenarios rely on decarbonising the production processes potentially using carbon-capture, but also the use of electric arc furnaces.
In this note, we analyse Nippon Steel’s green bonds in the current market context and provide takeaways for investors.
The company's active investment in blast furnaces and a ‘coal lock-in’ through long-term procurement suggests both increased international capacity, but also a commitment to emissions-intensive manufacturing methods, raising concerns about environmental and financial sustainability. Ultimately, while the proceeds from the green bond are legitimate, they are merely accomplishing the bare minimum and inadvertently prolonging the lifespan of a carbon-intensive steel production process.
