Japanese engineering companies, leapfrogging limited demand in matured domestic markets, are selling their energy-saving expertise directly to the world's biggest CO2 emitters including China, carving a niche in a market potentially worth at least $100 billion.
Leading the pack is Nippon Steel Engineering Co, a unit of the world's No.2 steelmaker Nippon Steel Corp, with its coke dry quenching (CDQ) system, a hot ticket item with steel mills in China, which is also selling well in South Korea, Brazil and Taiwan and entering Germany and India.
"The Chinese market is steaming hot," said Masaaki Sawa, director of the plant and machinery division at Nippon Steel Engineering, referring to the sales of its CDQ system, thanks to Beijing's recent energy-saving drive in the steel sector.
Nippon Steel Engineering and other Japanese clean tech firms including Kawasaki Plant Systems Ltd, offer an alternative and lucrative export model for clean technologies compared with solar, nuclear and advanced coal power, markets which are cumbersome, costly and difficult to enter without government support.
Forced by high energy costs in Japan, they had to develop energy-saving know how and turning adversity to advantage, have applied it in the export of steel, cement and other plants, industrial motors, boilers and systems such as CDQ.
The CDQ system captures waste heat from a cooling process in steel manufacturing and generates electricity for in-house use and has found a market in China which has doubled crude steel production in the past five years to feed its booming economy.
Kawasaki Plant Systems, a unit of Kawasaki Heavy Industries Ltd, is selling its energy-saving equipments to cement plants to China, while rival Chiyoda Corp has seen demand for its know-how in petrochemical complexes reach as far as Europe.
Kawasaki's power generating system, using waste heat from cement making process cuts power bills by about 30 percent for a typical cement plant with output of 5,000 tonnes a day. The system currently has a 50 percent share of the niche market mainly in China of about 30 billion yen ($339 million).
The company expects the sales for its latest waste heat -recycling system, combining a kiln with an incineration plant, developed jointly with China's Anhui Conch group to rise by more than 10 times as much now to 16 billion yen by 2020.
GOOD TIMING
Japan's exports of its clean tech expertise couldn't have been better timed with the market likely to grow further.
While chances look slim for a U.N. summit to agree a climate treaty later this year, the Group of Eight have agreed to support a goal of cutting global emissions by at least 50 percent by 2050.
A sum of $30 billion pledged for 2010-2012 in Copenhagen Accord to help developing nations cope with climate change could mean a part of the money would be used in energy-saving technologies.
Toru Ono, general manager at Nippon Steel Corp's energy technical planning, said ambitious national goals for 2020 would help the engineering unit's business.
"If governments set high 2020 emission-cut targets, steel mills in Europe and in the United States would have to address the energy-saving issue," Ono said.
In the last business year ended in March, revenue from steel sector energy-saving equipments including CDQ systems accounts to less than one percent of Nippon Steel Corp's group revenue of 3.49 trillion yen.
But competition isn't too far behind.
China is fast in catching up and manufacturing its own energy-saving devices.
While Nippon Steel Engineering has a 20 to 25 percent share in China's CDQ market of some 150 billion yen with its Chinese joint venture, it is competing with ACRE Coking and Refractory Engineering Consulting Co, a unit of China Metallurgical Construction Group Corp.
Japan still has an advantage over South Korea in overall energy-saving areas, however, as it is strong in a wide range of industrial segments, said Eiichiro Adachi, research chief of Japan Research Institute Ltd, a private think tank.
"South Korea has strength at the lower end of the product chain, such as assembly. But its weakness in the upper end, such as parts manufacturing and chemical and materials sectors means it wouldn't be so easy to improve each manufacturing process."
Still, Nippon Steel Engineering's Sawa said his company would find customers even if CDQ demand in China peaks in the next three to five years and would sell other energy-saving and resource-recycling devices abroad.
"India is our frontier, and so is Europe," Sawa said, adding that he expects consistent sales abroad of five to eight CDQ units a year of up to 10 billion yen apiece over the next decade.
According to the International Energy Agency (IEA), application of proven technologies and proper usage on a global scale could save 1.9-3.2 billion tonnes of CO2 emissions a year, with the iron and steel, cement and chemical and petrochemical sectors having the biggest potential.
A Japanese government estimate shows, based on the IEA's report, transferring the country's steel sector energy-saving devices alone could save 340 million tonnes of CO2 a year on the globe.
That would create a potential market for the sector of about $100 billion, based on prices of large-sized CDQ systems, which cut some 200,000 tonnes of CO2 emissions apiece a year.
