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Earlier this week, major Japanese trading house Mitsui & Co and Japan-based recycler Ibokin Co signed a memorandum of understanding (MOU) to collaborate on improving the supply of ferrous scrap, while the steel sector continues its shift toward lower-carbon production routes, the latter said on April 21.
“With the advancement of decarbonization and the expected expansion of steel production using electric-arc furnaces (EAF), there is greater importance in ensuring stable procurement, quality assurance and traceability of raw materials such as steel scrap,” Yoshitomo Nishimitsu, general manager of Mitsui & Co’s steelmaking raw materials department, said.
Headquartered in Japan’s Hyogo prefecture, Ibokin operates an integrated recycling business covering demolition, sorting and disposal of building materials. Through its “demolition general contractor” model, it aims to control the full resource recovery chain from dismantling to final recycling.
Mitsui, meanwhile, contributes a global procurement network and long-standing experience across the metals value chain, spanning primary resources and secondary materials such as scrap.
Under the MOU, the two companies will study opportunities to enhance the dismantling, sorting and distribution processes, with the aim of strengthening scrap supply chains.
Most market participants viewed the move as a positive step for the recycled materials sector, although one Japan-based trade source noted a lack of detail.
A Singapore-based trade source also said the initiative was likely intended as groundwork for longer-term projects, with limited near-term impact expected on market fundamentals.
The announcement coincided with Japan’s pledge to mobilize ¥1 trillion ($6.3 billion) in combined public and private investment by 2030 to strengthen domestic metal and plastic recycling capacity.
A key target under the plan was to establish 2 million tonnes per year of capacity to upgrade ferrous scrap into high-grade steels for use in electric vehicles (EV) and other applications.
Downstream producers have welcomed the supportive policy direction, though questions remain over whether domestic scrap generation can keep pace, given Japan’s already mature recycling sector and structurally declining industrial scrap output.
Despite tightening domestic scrap supply, Japan’s ferrous scrap exports rose to 7.71 million tonnes last year, up by 17.93% from 6.54 million tonnes in 2024 and exceeding volumes recorded in 2023 (6.93 million tonnes) and 2022 (6.31 million tonnes).
The increase was mainly driven by stronger demand from Vietnam and Bangladesh, reinforcing the country’s role as a key ferrous scrap exporter supporting regional demand for the steelmaking raw material, alongside declines in Japanese crude steel output.
Japanese steel mills produced 80.7 million tonnes of steel in 2025, according to the World Steel Association, down by 4% year on year and extending a decline in the sector over the past five years.
Japan was the world’s fourth-largest steelmaking nation in 2025, behind China, India and the US, according to Worldsteel. India first surpassed Japan as the world’s second-largest producer in 2018.
But as Japan progresses with decarbonization efforts in its carbon-intensive steel sector, domestic demand for scrap is expected to rise in line with steelmakers’ emissions-reduction targets, according to sources.
The Japan Iron and Steel Federation (JISF) has previously set a target to increase domestic scrap circulation by around 6.9 million tonnes by 2030 in response to anticipated rapid growth in demand for scrap.
“Japan’s Ministry for the Environment is promoting policies to curb the discharge of metals and plastics and to strengthen recycling systems… one of the objectives [could be] to prevent the outflow of steel scrap overseas,” a Japanese industry source told Fastmarkets.
Given that the legal framework has yet to be fully established and the eventual scope of implementation remains uncertain, market participants will have to wait for greater clarity, the source added.
Other market sources previously raised concerns that any possible regulation limiting scrap exports would have a significant effect on the region.
Meanwhile, major Japanese steelmaker Nippon Steel has moved forward with the conversion of its Kyushu Works facility from blast furnace operations to an EAF-steelmaking process as part of its decarbonization strategy, the company said on April 15.
The project is centered on a large-scale EAF with a capacity of around 2 million tpy, which the company has positioned as the world’s first integrated system for the mass production of high-quality steel using a large EAF, incorporating secondary refining and continuous casting capabilities.
Total investment in the project stood at ¥630.2 billion, with production expected to begin in the second half of fiscal year 2029.
Alongside this flagship development, the company also reaffirmed plans to invest roughly ¥140 billion in a new 500,000-tpy EAF at its Setouchi Works, also scheduled to begin production in the second half of fiscal year 2029.
In addition, ¥98.5 billion would be allocated to modify and restart a 400,000-tpy EAF at its Yamaguchi Works, with operations expected to commence in the second half of fiscal year 2028.
With reference to estimates by the World Steel Association (Worldsteel) that the average recycled steel-EAF route uses around 70% ferrous scrap, all three of Nippon Steel’s EAFs would require roughly 2 million tpy of scrap at full utilization, based on a steady-state run rate implied by operations in the second half of fiscal year 2029.
Despite recent progress by both the government and the private sector, market sources highlighted that elevated raw material costs, particularly for scrap used in EAF production, could pose a potential headwind to these efforts.
Ferrous scrap prices in Japan have risen steadily since late February, supported by firm domestic demand and supply chain concerns linked to geopolitical tensions in the Middle East.
Fastmarkets’ price assessment for steel scrap H2, export, fob main port Japan stood at ¥54,000-55,000 per tonne on April 22, up ¥10,000 from ¥44,000-44,500 per tonne at the start of the year on January 7.
For higher-grade scrap material, Fastmarkets’ weekly price assessment for steel scrap Shindachi bara, export, fob main port Japan stood at ¥58,000-59,500 yen per tonne, up ¥9,500-10,000 from 48,500-49,500 yen per tonne over the same period.
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