[Edaily Marketin, Reporter YunJi Kim ] The investment landscape for global steelmakers is shifting. While domestic steel companies are expanding into new industries such as artificial intelligence (AI), robotics, and biotechnology through corporate venture capital (CVC), overseas steelmakers are pouring funds into technologies that enhance competitiveness in their core business, such as decarbonization, energy transition, and metal recycling. There is a strong trend toward betting on technologies that will transform the steel industry itself, rather than seeking new revenue streams outside the steel sector.

According to the investment banking (IB) industry on the 3rd, major global steelmakers have recently been successively expanding their investments and collaborations with technology companies involved in decarbonization, energy efficiency, and raw material recycling—areas closely tied to their core steel business.

A prime example is ArcelorMittal, the world’s largest steelmaker. Through the “XCarb Innovation Fund,” launched in 2021, ArcelorMittal has invested approximately $200 million in nine companies to date. Most of these investments—including renewable energy, long-duration energy storage, carbon recycling, green hydrogen, and iron ore electrolysis—are directly linked to steel production. The U.S. energy startup Electrified Thermal Solutions (ETS), in which ArcelorMittal invested last September, fits into this same framework. ETS is developing technology that uses electric arc furnaces to generate high-temperature industrial heat and store it in refractory bricks. ArcelorMittal has taken note of the potential to replace the gas used in the steelmaking process with electricity and is currently verifying its feasibility for real-world application.

In addition to decarbonization, securing raw materials and resource recycling are emerging as key investment pillars. This is because the faster the transition to electric arc furnaces accelerates, the more critical it becomes to ensure a stable supply of recycled raw materials, such as scrap iron. Last year, Nippon Steel made its first equity investment in a startup by participating in a $9.1 million follow-on Series A round for SunMetallon, a metal recycling company. SunMetallon uses proprietary heating technology to convert metal waste back into raw materials in a low-cost, low-carbon manner. The rationale behind the investment is that recycling scrap metal generated during steel production and post-processing can simultaneously reduce raw material costs and carbon emissions.

It is also evident that even when expanding into new industries, these companies are careful not to lose the connection to their existing businesses. Kobe Steel invested in the U.S. all-solid-state battery startup Lasagna One in March of last year. Although batteries themselves are somewhat removed from the steel industry, the company cited the potential to apply material mixing equipment and isostatic pressing technology from its machinery division to the manufacturing process as the rationale for the investment.

Investment approaches are also evolving. Rather than simply acquiring equity stakes, companies are applying startup technologies directly in actual steel mills to verify their performance. For example, in August of last year, India’s Tata Steel launched the “Tomorrow Lab Accelerator” in partnership with the Indian Institute of Technology (IIT) Bhubaneswar and others to identify startups in the fields of water treatment, waste heat recovery, robotics, and automation. In collaboration with the German energy technology startup KraftBlock, the company is demonstrating a system at its Jamshedpur steel mill in India that stores high-temperature waste heat and recycles it back into the production process. The company estimates this will reduce carbon dioxide emissions by approximately 22,000 metric tons annually.

The approach to leveraging external technology is expanding from individual startup investments to the creation of entire ecosystems. Nordic steelmaker SSAB is advancing a related program after receiving 20 million euros in funding from Business Finland, an agency under the Finnish government, in April of this year. The goal is to jointly develop low-carbon steel technologies with the participation of more than 200 entities, including research institutes, universities, technology companies, steelmakers, and end-user companies.

This trend of integrating external capabilities into core business operations is also evident in the AI sector. Japan’s JFE Steel is utilizing AI to enhance its steelmaking processes rather than developing it as a separate new business. Its collaboration with Amazon Web Services (AWS) in April of this year to drive the digital transformation of steel mills using cloud computing and generative AI is part of this same strategy. The key focus is on analyzing production data with AI to optimize processes and predict equipment malfunctions.

Behind overseas steelmakers’ active incorporation of external technologies lies the increasingly fierce competition for survival in the steel industry. As carbon emission regulations, supply glut originating from China, and cost competition have intensified simultaneously, it has become difficult to maintain competitiveness relying solely on existing production methods.

An official from the domestic venture capital (VC) industry stated, “While domestic steelmakers are seeking new growth engines outside the steel sector through corporate venture capital (CVC), overseas steelmakers are focusing on finding breakthroughs within the steel sector by leveraging startups and technology companies.” The official added, “As decarbonization and process innovation have emerged as critical survival challenges, it is highly likely that investments and collaborations in technologies directly linked to their core business will continue to expand in the future.”