The Japanese government has just announced a credit of approximately $1.1 billion to decarbonize JFE Steel, one of the world’s largest steelmakers. At first glance, it seems like just another industry news item, but it goes far beyond that.

This planned move shows that Tokyo is in a hurry to reduce emissions in the steel supply chain, which today is one of the most polluting globally. By taking on part of the financial risk of these projects, Japan sends a clear message to the market: the era of low-carbon steelmaking has begun, and it’s now a matter of industrial strategy and competitiveness.

Currently, the sector accounts for about 8% of global CO₂ emissions. For decades, the use of coal in blast furnaces was the necessary cost to build infrastructure and sustain large industrial complexes. But that model has become expensive and unsustainable.

Japan is not alone on this path. Europe is following the same route with policies like CBAM, which taxes emissions on imports, plus various incentives to accelerate the transition. International capital has already noticed this shift and is now seeking assets that deliver financial returns along with real decarbonization.

Where does Brazil fit into this?

Our country has a combination of factors that almost no competitor possesses: high-quality mineral resources and clean energy at scale. To power electric arc furnaces, which are the basis of this transition, the purity of the ore determines whether the equation works or not.

Without this premium raw material, even the most modern technology loses efficiency. The crucial point is that this type of ore is rare and represents only 3% of global reserves. This is exactly where Brazil, particularly the state of Bahia, becomes a key piece on the global map.

This competitive advantage combines high-grade deposits with a renewable electricity matrix. In practice, few places can offer ore and clean energy in the same package, and it’s this duo that’s unlocking the new global demand.

Despite these qualities, Brazil still struggles to move beyond the volume-export model with low added value. We have the potential to deliver a finished industrialized product with a clear advantage in a world desperately trying to meet environmental targets.

It’s in this context that hot briquetted iron (HBI) and pellets emerge, popularly known as “green iron.” They’re not just trendy terms, but products that allow steelmakers to reduce their carbon footprint without losing quality.

The Japanese example also teaches that speed is decisive. They found a formula to accelerate investments by putting public money on the table with clear deadlines and targets. Basically, whoever organizes first will set the rules of the game.

Today, the biggest obstacle worldwide isn’t a lack of money, but a scarcity of structured and secure projects to receive these investments. There is capital available, but structured projects are lacking to absorb it.

Brazil has everything to lead this market, but it depends less on potential and more on execution in areas like regulation, infrastructure, and coordination. The choice is simple: we can continue as suppliers of raw stone or become protagonists of the new global industry. Japan’s move proves the transition has moved from paper to reality and is happening now. Brazil has the cards; it just needs to know how to play them.

Emerson Souza, Vice President of Institutional Relations at Brazil Iron.

Source: Japan’s Decarbonization Progress and Strategic Opportunity for Brazil