Nippon Steel plans to invest JPY35bn ($338mn) to expand its electrical steel manufacturing capacity at Setouchi works in Hirohata Japan. The expansion will cater to an expected rise in global demand for high-grade electrical steel due to increased consumption of electricity.
The investment at Setouchi works is part of Nippon’s focus on adding electrical steel capacity which also includes expansion and upgrade of Kyushu Works Yawata. In November 2019, Nippon started restructuring and reorganizing its steelworks to increase collaboration and improve the company’s competitiveness. At the time of restructuring, the company announced a JPY14bn investment for Setouchi works, while an investment of JPY46bn August 2019 and JPY10bn in May was outlaid for Kyushu Works, taking Nippon’s total investment for upgradation of electricity steel sheet to JPY104bn. The expansion work will include upgrades to pickling, annealing, cold rolling, slitting line and physical distribution facilities.
With these investments, the company’s electrical steel manufacturing capacity is expected to increase by 40pc by the first half of 2023. The upgrade facilities will also help reduce carbon emission by approximately 3mn mt per year.
Nippon’s electric sheet sheet capacity expansion strategy is focused on high-grade steel used in electric transformers. With the growth of emerging economies and the emphasis on reduction of carbon emissions, the demand for electricity and electric transformers is expected to increase at a steady pace. Higher consumption of electricity will drive the demand for low energy loss non-oriented electrical steel sheets that are used in transformers. Also, higher demand for eco-friendly cars or electric, hybrid vehicles would increase demand for electrical steel.
Adoption of EAFs
Nippon Steel has traditionally hesitated in the adoption of electric arc furnaces (EAFs) due to challenges faced in producing high-quality steel through EAF mode, which uses scrap as a feed. Nippon is setting up an EAF at Hirohata works for the production of electrical steel sheet to be used in the manufacture of motors for electric vehicles. The 720,000mt annual capacity will commence production in H2 2022.
Earlier, Nippon Steel had forecast Japan’s domestic steel demand for FY2021 at 50mn mt and expected H2 steel products demand to be below the pre-pandemic level at 26mn mt. The company expected H2 capacity utilization rate at 80pc.