Coal or Corporate Responsibility: Nippon Steel at a crossroads with its U. S. Steel acquisition

On June 18, Nippon Steel officially completed its acquisition of U. S. Steel, a major American steelmaker. The USD 14.9 billion deal was finalised after a year and a half of political debate over national security concerns.

How Nippon Steel plans to allocate its announced USD 14 billion in capital investments, in addition to the acquisition cost, is drawing the most attention, but the more important question is: will the company use this opportunity to align its overseas expansion with decarbonisation, or continue down the path of coal dependency?

U. S. Steel owns a state-of-the-art electric arc furnace (EAF) in the state of Arkansas, and has announced plans to build a new DRI facility, raising hopes for a decarbonised production base for high-grade steel. At the same time, the company continues to operate coal-based blast furnaces, signaling deep reliance on coal remains. The strategic choices made for these facilities post-acquisition will play a decisive role in determining the company’s climate direction.

Combining Nippon Steel’s financial resources, U. S. Steel’s iron ore assets, and renewable energy potential in the US could open up new possibilities for producing low-emissions steel—especially as demand grows in industries like automotive manufacturing.

Evolution of the acquisition plan

Against the backdrop of stagnant domestic demand, Nippon Steel has pivoted its business strategy to an aggressive overseas expansion under its “100 million tonnes of crude steel vision”. In December 2023, the company announced plans to acquire U. S. Steel for approximately USD 14.9 billion, offering a 40% premium over the share price at the time of the announcement. Bringing U. S. Steel – owner of eight blast furnaces and three electric arc furnaces – under its umbrella would elevate Nippon Steel to the world’s third-largest steel producer. 

Initially, the deal was seen in a positive light as a strategic opportunity to gain access to the US market, to benefit from policy support under the Inflation Reduction Act (IRA), and to become a global leader in decarbonisation.

However, in 2024, with the US presidential election looming, both Donald Trump and Joe Biden voiced opposition to the deal. To ease domestic concerns, Nippon Steel announced a USD 1.4 billion investment in March, followed by an additional USD 1.3 billion in August. In December 2024, the company issued a letter to U. S. Steel employees, committing to relining two blast furnaces at Mon Valley and four at the Gary Works by 2030. While aimed at securing local jobs and political support, this move also effectively committed to prolonging coal-based blast furnace operations – bringing into question the company’s stated goal of achieving carbon neutrality by 2050.

In response, the Sierra Club – the oldest and largest grassroots environmental organisation in the United States – submitted a joint letter with over 20 other groups to the Congress in October 2024, formally opposing the acquisition on grounds of climate and labour concerns. Civic groups located near U. S. Steel facilities also raised alarm over the continued threat of air pollution and health risks tied to coal-based production.

In January 2025, the Biden administration blocked the deal on national security grounds, prompting Nippon Steel to file a lawsuit. The decision was then delayed by the Biden administration to June, but in April, after President Trump began his second term, he instructed the Committee on Foreign Investment in the United States (CFIUS) to reopen the review. By May, President Trump publicly expressed his support for the acquisition on social media. In turn, Nippon Steel unveiled a USD 14 billion investment plan (in addition to the USD 14.9 billion acquisition cost), including up to USD 4 billion for the construction of a new steel plant. On June 18, the acquisition of U. S. Steel by Nippon Steel was officially completed.

Timeline of Key Events

Climate problem

The plan to reline two blast furnaces at Mon Valley and four at the Gary Works by 2030 is a great concern from the climate lens. Blast furnace relining costs run to USD 300 million to 1 billion per unit, on a 15 to 25-year cycle. Such long lifespans pose a risk that they will become stranded assets amid tightening climate regulations.

U. S. Steel’s total emissions in 2023 amounted to 29.51 Mt (Scope 1 and 2). Nippon Steel has announced plans to reline six of U. S. Steel’s blast furnaces by 2030, prolonging coal-based production well into the future. Combined with its total reported emissions of 76.5 Mt (Scope 1 and 2) for FY2023, Nippon Steel’s enlarged operations will generate an estimated 100Mt-plus of emissions per year. 

U. S. Steel’s air pollution problem

Underlying the controversy surrounding the acquisition is not only the issue of climate change, but also U. S. Steel’s long-standing pollution problem. Communities living near its facilities have suffered from air pollution related to iron and steelmaking operations for generations.

U. S. Steel’s blast furnaces and coke ovens emit an estimated 14 million tons of greenhouse gases (GHG) annually. At major sites such as the Mon Valley Works and Gary Works, repeated environmental violations due to aging infrastructure have become a serious concern. In particular, the coke ovens at the Mon Valley plant in Pennsylvania have been a persistent source of hazardous emissions, including hydrogen sulfide (H2S), raising alarms about public health impacts. Following a major fire in 2018, malfunctions in the emission control system led to recurring odor problems and frequent violations of air quality standards. Since 2019, the company has been repeatedly fined. 

Most recently, in December 2023, U. S. Steel was fined USD 2.2 million for exceeding H2S limits. In February 2024, it was fined nearly USD 2 million for 362 documented violations. In response to persistent air quality issues, the Allegheny County Health Department introduced the “Mon Valley Air Pollution Episode Rule,” which restricts operations on days when pollution levels are forecast to exceed regulatory thresholds, and has ordered U. S. Steel to take corrective action.

Conclusion

How Nippon Steel uses the USD 14 billion it has promised to invest is key. So far, its announced investment has primarily targeted coal-based blast furnaces, but to achieve its 2050 carbon neutrality goal, Nippon Steel must pivot. Even with Nippon Steel’s focus on Super COURSE50, the target for emissions reduction from blast furnaces is limited to 50% after 2040. The company’s plan to use unique “mass balance” creative accounting techniques will not make up the difference. 

The company’s success hinges on whether it can leverage U.S. Steel’s iron ore assets and the abundant renewable energy in the US to shift toward low-emissions technologies such as hydrogen-based direct reduction of iron ore (H2-DRI) and electric arc furnaces.

Fortunately, there are tailwinds in the U.S. market. In March this year, South Korea’s Hyundai Steel announced a plan to invest about USD 5.8 billion to build a new EAF facility in Louisiana, which will also include a DRI furnace—aiming to reduce emissions while enhancing competitiveness.

It is also highly likely that future governments, key buyers like the auto industry, and investors will be pushing for greater and greater emissions cuts between now and 2050. If Nippon Steel extends the life of existing blast furnaces, it risks falling behind in both climate action and technological innovation. Nippon Steel urgently needs to articulate a plan to rapidly phase out coal-based production and embrace the future of near-zero emission steelmaking.