Japanese trading giant Mitsui & Co. and recycling specialist Ibokin Co. have signed a memorandum of understanding to secure local ferrous scrap supplies. The partnership comes as Japan’s steel sector accelerates its shift toward lower-carbon production methods. This transition relies heavily on electric arc furnaces, which require a steady stream of high-grade raw materials. However, a shrinking domestic manufacturing base and strong export demand are tightening local scrap availability. This supply squeeze threatens to drive up procurement costs for major steelmakers.
Strategic Partnerships Form to Secure Local Raw Materials
The agreement between Mitsui and Ibokin aims to optimize the collection, sorting, and distribution of steel scrap across Japan. Ibokin operates an integrated model covering building demolition and material disposal, giving it direct control over upstream resource recovery. Mitsui will leverage its global procurement network and extensive logistics experience to strengthen the secondary materials value chain. This corporate cooperation reflects growing industry anxiety over the long-term availability, quality assurance, and traceability of domestic recycling feedstocks.
Concurrently, Japan’s government has pledged to mobilize 1 trillion yen in public and private investment by 2030 to expand recycling capacity. A major objective of this state policy is to establish 2 million tonnes of annual capacity to process low-grade scrap into premium raw materials. These upgraded materials are vital for manufacturing advanced steels used in electric vehicles. Industry sources suggest that the Ministry for the Environment may also introduce policies to restrict the outflow of steel scrap overseas to protect domestic supply.
Steelmakers Accelerate Electric Arc Furnace Conversions
Major steel producers are moving forward with aggressive decarbonization strategies that replace traditional blast furnaces with electric arc systems. Nippon Steel recently announced a 630.2 billion yen investment to convert its Kyushu Works facility. The project features a large-scale electric arc furnace with an annual capacity of 2 million tonnes. Scheduled to begin operations in the second half of fiscal year 2029, the system will mass-produce high-quality steel using advanced secondary refining and continuous casting.
Nippon Steel is also investing 140 billion yen in a new 500,000-tonne electric arc furnace at its Setouchi Works. Furthermore, the company will allocate 98.5 billion yen to restart a 400,000-tonne unit at its Yamaguchi Works by late fiscal year 2028. Given that standard electric arc furnace routes utilize roughly 70 percent ferrous scrap, these three combined facilities will require nearly 2 million tonnes of scrap per year at full utilization. This looming demand spike is intensifying the race to lock in reliable domestic processing streams.
Surging Export Volumes and High Prices Challenge Mills
Despite declining domestic crude steel output, Japan’s ferrous scrap exports rose to 7.71 million tonnes last year. This represents a 17.93 percent increase from the 6.54 million tonnes exported in 2024, driven by robust demand from infrastructure projects in Vietnam and Bangladesh. This steady outflow of raw materials has left domestic steel mills vulnerable to rising spot market prices.
Elevated raw material costs represent a significant financial headwind for local electric arc furnace operators. High-grade Shindachi bara scrap export prices at Japanese ports have risen to 58,000–59,500 yen per tonne. This is a sharp increase from the 48,500–49,500 yen per tonne recorded at the start of January. Tight local supply, steady regional demand, and geopolitical tensions in the Middle East continue to support these high pricing levels, squeezing the profit margins of decarbonizing steel mills.
Market Impact
○ Impacted Metals: H2 heavy melting scrap, Shindachi bara industrial busheling scrap, low-carbon crude steel
○ Direction: Bullish
○ Time Horizon: Medium-term
○ Affected Industries: Steelmaking, automotive manufacturing, demolition, metal recycling
○ Related Price Reports: Stainless Steel Weekly Price Report
○ Watch Item: Track whether Japan implements official export restrictions or tariffs on secondary ferrous materials to prioritize domestic steel mill procurement.
SuperMetalPrice Commentary:
The collaboration between Mitsui and Ibokin highlights a critical vulnerability in Japan’s green steel transition. Converting blast furnaces to electric arc systems is a proven way to cut industrial carbon emissions, but it alters raw material dynamics by making scrap a strategic asset rather than a basic commodity. As Nippon Steel and its peers scale up their recycling capacity, Japan will transition from a major regional scrap exporter to an aggressive domestic consumer. This shift will trigger supply shortfalls and higher pricing across Asian steel production hubs.
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