TOKYO, May 10 (Reuters) - Japan's biggest steelmaker Nippon Steel Corp (5401.T) plans to supply carbon neutral steel from the fiscal year starting 2024, it said on Tuesday. "There is only one way to overcome the unique difficulties that Japan's steel industry faces.

That is to supply carbon neutral steel ahead of our global competitors," said Nippon Steel Corp president Eiji Hashimoto.

Hashimoto said that the company will initially supply 700,000 tonnes of steel that would not emit CO2 in the manufacturing process, either by shifting to alternative energy sources or by capturing any CO2 that is emitted.

"If we make steel with energy that is carbon neutral, then the steel itself is carbon neutral too," Hashimoto said, but did not specify a timeline for when it could be produced at higher quantities.

The company currently faces an array of challenges, including lower demand for steel in China, market volatility triggered by war in Ukraine, as well as a weak yen.

Nippon Steel did not release its annual net profit outlook for the year ending March 2023, citing the Ukraine war as an example of the global uncertainty making foresight difficult.

"If the situation concerning Ukraine and China improves we may see steel demand rise, but at the moment it's very hard to foresee such a scenario," Hashimoto said.