By Yuka Obayashi and Ritsuko Shimizu

TOKYO (Reuters) – Nippon Steel, the world’s No.3 steelmaker, will boost research and development (R&D) spending to speed decarbonisation in steelmaking as it faces growing pressure to cut carbon emissions to help tackle climate change, a company executive said.

“We will input considerable resource into R&D on decarbonisation technology,” Executive Vice President Katsuhiro Miyamoto told Reuters in an interview on Friday. Further details will be laid out in March.

Japanese steelmakers account for 14% of the nation’s carbon emissions and need to make cuts while remaining profitable in a market where competition – mainly from China – is growing.

Nippon Steel and its local peers have been working together to develop iron ore reduction technology that uses hydrogen in blast furnaces to cut CO2 emissions by 30% by 2030. That’s already a big ask for an industry that relies on carbon-intense coking coal to make a metal used in everything from cars to cutlery.

But Japan’s pledge in October to achieve carbon neutrality by 2050 has forced the industry to look for ways to accelerate its shift towards carbon-free steel.

Nippon Steel will step up development of hydrogen use in iron ore reduction, carbon capture and storage technology, and ways to make high-end steel in electric furnaces, Miyamoto said.

The government, however, will need to develop a strategy to provide cheap carbon-free electricity, he said.

When blast furnaces use coke, made by coal, to eliminate oxygen contained in iron ore, carbon dioxide is discharged in the chemical reaction. By substituting hydrogen for coke, water is created instead of carbon dioxide, a technology called hydrogen reduction that is seen as a promising method for combating global warming.

Nippon Steel forecast a net loss for the year to March 31, a second straight year in the red, as demand collapsed due to the COVID-19 pandemic.

The company is confident it will return to profit in the upcoming year, Miyamoto said, as demand from industry will remain solid and earnings from its Indian unit will grow.

“No decision has been made to close more blast furnaces,” he said, when asked about a newspaper report that Nippon Steel would shut a blast furnace at its Kashima plant.

(Reporting by Yuka Obayashi and Ritsuko Shimizu; Editing by Tom Hogue)