As the shift to electric vehicles gathers pace, Japan's two biggest steelmakers may accelerate investment in a niche steel.
Interviews with senior executives show that the two companies are looking to raise electrical steel output further.
According to the executive vice president of the company, it looks like supply will be insufficient. Customers want us to increase the capacity so more steps are being considered.
A 50% increase in production capacity for electrical steels is due to be completed by the end of the decade. The CFO of JFE said in an interview that the company will consider further steps beyond the doubling of capacity. He said that further expansion will probably be needed.
Magnetic properties of electrical steels help limit energy loss in EV motors and are used in power generation equipment and mobile phones. Due to the move away from fossil fuels, they are joining a group of materials that are on the verge of a long-term boost in demand.
S&P Global Mobility said in a note in June that there are barriers to entry for electrical steel producers. The supply is getting tighter.
JFE is considering building a plant in North America or other regions where demand will be strong. The company is looking to expand outside of Japan, but the next investment is more likely to be domestically.
Japanese carmakers have been slower to adopt battery-powered vehicles than their Chinese and Western counterparts. Toyota wants to sell 3.5 million vehicles a year by the end of the decade. A person at Toyota wouldn't speak.
The material will need to be used at a faster pace than a straight line of growth.
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