Activist shareholders are cautioning that Nippon Steel’s proposed $15 billion acquisition of U.S. Steel could escalate the Japanese steel giant’s costs for decarbonization efforts.
Nippon Steel, the world’s fourth-largest steelmaker, announced the takeover of U.S. Steel last year, but the deal has faced resistance from a powerful labor union and the White House.
According to the Australasian Centre for Corporate Responsibility (ACCR), an activist shareholder group that owns less than 1% of Nippon Steel, the potential integration of U.S. Steel’s 11 blast furnaces into Nippon Steel’s operations “will almost certainly increase the cost of decarbonization for the company.”
ACCR, along with other stakeholders including Corporate Action Japan (CAJ) and Legal & General Investment Management (LGIM), have filed shareholder proposals urging Nippon Steel to enhance its decarbonization strategy and transparently communicate the takeover’s impact on its climate goals.
In response, Nippon Steel stated that it plans to share decarbonization technologies, such as hydrogen injection into blast furnaces, with U.S. Steel should the acquisition be completed. However, the company did not provide specifics on the overall cost implications.
Prior to the U.S. Steel bid, Nippon Steel had estimated that its decarbonization efforts could require 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 government support.
CAJ’s chief executive, Yasunori Takeuchi, emphasized the need for Nippon Steel to provide more information on its carbon emission targets “so that investors including ourselves can make appropriate assessments of risks, including the total cost of decarbonization as a whole group.”
The concerns raised by shareholders underscore the potential challenges Nippon Steel may face in reconciling its decarbonization ambitions with the acquisition of a company that operates a significant number of carbon-intensive blast furnaces.