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Nippon Steel's proposed acquisition of U.S. steel, risks raising decarbonisation costs, for Japan's top steelmaker, an activist shareholder group said, urging the company to address the takeover's impact on its climate goals.
Nippon Steel, the world's fourth biggest steelmaker, last year announced a $15 billion takeover offer for U.S. Steel, which backed the bid, but, has faced resistance from a powerful labour union, and the White House.
"The potential addition of U.S. Steel's 11 blast furnaces to Nippon Steel's operations, will almost certainly increase the cost of decarbonisation for the company," Brynn O'Brien, executive director of the Australasian Centre for Corporate Responsibility (ACCR), said.
ACCR, which has less than 1 per cent of Nippon Steel's shares, has filed shareholder proposals, with two other stakeholders, Corporate Action Japan (CAJ), and Legal & General Investment Management (LGIM), calling on the company to improve its decarbonisation strategy.
Not-for-profit organisation CAJ, wants more information on the company's carbon emission targets "so that investors including ourselves, can make appropriate assessments of risks, including the total cost of decarbonisation as a whole group," Yasunori Takeuchi, CAJ's chief executive, said in an e-mail.
Nippon Steel holds its annual general meeting on June 21.
Shareholder activism on climate change, has gained momentum in Japan over the past few years, but, has not necessarily led to changes in policy at companies that have already set out emission reduction plans.
Under plans announced in 2021, before the U.S. Steel bid, Nippon Steel estimated that decarbonisation may cost it up to 5.5 trillion yen ($34.8 billion) in capital spending, including research, and development, by 2050, with some of the costs to be covered by state support.
"Nippon Steel needs to consider how the acquisition impacts its decarbonisation plans, and transparently communicate this," said O'Brien.
As part of the takeover proposal, Nippon Steel pledged to spend at least $1.4 billion on technology at U.S. Steel's mills, to "produce more advanced, and environmentally sustainable steel".
To help decarbonise, Nippon Steel wants to feed hydrogen into its coking coal-exposed blast furnaces, a process it is testing at a steel site near Tokyo. It also plans to use carbon capture, utilisation, storage, and add more electric arc furnaces.
($1 = 158.0800 yen)
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