Top Message : Greetings from the New President

About Us[Message] Representative Director, President and COO:Tadashi Imai

1. Our management reforms, and our aim to become the “Best Steelmaker with World-leading Capabilities”

The Nippon Steel Group has carried out management reforms such as the consolidation of production lines through structural measures in Japan, a significant margin improvement in direct contract-based sales, and the selection and concentration process of overseas businesses. Our efforts have paid off and we are coming close to reaching the target of 1 trillion yen in underlying business profit, far exceeding the initial target of 600 billion yen. Our domestic steelmaking business is expected to become more profitable by the active programs in progress to refresh the upstream steelmaking processes and a hot strip mill, and by making progress in upgrading the product mix through the subsequent launch of active facility investments in strategic products such as electrical steel and ultra-high-tensile steel.
Another pillar has been the expansion of overseas businesses. In India, AM/NS India is generating profits steadily, and is expanding its production capacity in this growing market. In the ASEAN region, G Steel and GJ Steel, electric arc furnace steelmakers in Thailand, have joined our Group, enabling us to develop an integrated business model from upstream steelmaking to product. In the United States, we are doing our utmost to complete the planned acquisition of U. S. Steel.
While the global expansion of steel production itself is the horizontal axis of our business strategy, the vertical axis is the expansion of our business domains upstream and downstream of steel production, such as raw materials, steel distribution and processing. In the raw materials business, we have already completed investment in coking coal in Canada, and are considering investment in direct reduced iron. In steel distribution business, we are advancing the sophistication of the supply chain with Nippon Steel Trading Corporation and other processing companies in the Group. By taking these actions, we will make our earnings structure even more solid.
The important point here is that our steelworks in Japan are where the vertical and horizontal axes intersect and are the linchpin of our entire steel businesses. The continual important and fundamental management issue is to maintain and strengthen cost competitiveness and profitability backed by frontline manufacturing capabilities, collaboration between steelworks and marketing divisions, and management capabilities of cross-region steelworks.
When we establish the globally expanding vertical and horizontal axes with a strong domestic steelmaking business at the core, we will stand at the top of the global steel industry, achieving our aim of becoming the “Best Steelmaker with World-leading Capabilities.”

2.The key challenges we face: Two growth opportunities

Let me explain my views on various issues that we will face as we go forward.
Concerning the underlying business environment, we are witnessing the formation of market blocs in the global economy with the ongoing quest for economic security in the background. In the steel market, the deceleration of the Chinese economy and the growth of India has resulted in the decoupling between declines in product prices and stubbornly high raw material prices, which will continue as a structural problem. In Japan, amid a declining population and a shift away from manufacturing to a service-based economy, a natural recovery in steel demand cannot be expected. Our management policy based on this macroeconomic recognition is exactly what we are implementing in our Medium- to Long-term Management Plan up to fiscal 2025. We need to carry through this plan to the finish line, and in addition, I would like to touch on some of the key challenges, in particular growth opportunities and decarbonization.
First, we will take this time of great changes in society and capture new business opportunities to our advantage. Response to global climate change has become a major force in the industry, and new demand has been created in the materials field through changes in the industrial structure. Moreover, we need to develop measures that lead to the growth of domestic business by exploring new needs which are born amid the above-mentioned industrial changes, in fully concerted efforts of our Group from product development to steel distribution and processing network. We will actively explore to capture these new business opportunities while maintaining our domestic production scale and serving the very purpose of the manufacturing industry in creating new added value for society.
Second, we will further strengthen our global business—our growth engine in terms of both production scale and profitability, and enhance the management that supports it. We are expanding our integrated steelmaking business in growing markets, particularly in India, ASEAN, and North America following the completion of the planned acquisition of U. S. Steel. This means that we are entering a new stage in our global expansion. Japan needs to become the global headquarters that deploys necessary resources according to local needs and provides strong support for the sound development of local Group companies. Our domestic steelmaking business thereby needs to become a linchpin that supports these overseas businesses. We will need to enhance the strategic management function of the headquarters. On the technology side in areas such as R&D, manufacturing technology, facility maintenance and engineering, we will exert the true value of our manufacturing strength on the world stage, which has been honed in our domestic business—as I stated as the intersection of the vertical and horizontal axes.

3.Decarbonization measures: A group-wide challenge

The next issue I would like to mention is about decarbonization, which can be the greatest challenge for us.
We aim to reduce greenhouse gas emissions by 30% or more by 2030, as we advance toward achieving carbon neutrality by 2050. Fundamentally, steel has one of the lowest greenhouse gas emissions per ton among various industrial materials and is a recyclable material that can be reused repeatedly. The importance of steel remains unwavering even in the age of carbon neutrality. As it is inexpensive and has excellent properties, it is used in overwhelmingly large quantities, which makes the steel industry accountable for about 40% of the CO2 emissions of Japan’s industrial sector. In recent years, there have been discussions of regulations where CO2 emissions could become an international trade constraint, and it is no exaggeration to say that the success or failure of our decarbonization measures may affect Japan’s industrial competitiveness.
The specific issues to be addressed include technical themes such as R&D and facility planning, the creation of markets where investment costs can be recovered, and the establishment of a national policy to support these actions. As a pioneer in the industry, we are fully committed to developing technologies such as hydrogen reduction and large-scale electric arc furnaces that will drastically revolutionize conventional steelmaking processes, and to advancing efforts to realize massive capital investment plans jointly under public and private sector cooperation. The rise in manufacturing costs due to the elimination of fossil fuels must ultimately be reflected in the prices of steel products and the prices of products using steel to make the market economy work. The concept that the reduction of CO2 emissions as environmental value generates economic value must become a common understanding and be included in behavioral norms for the entire supply chain, including consumers. Thus, various initiatives to move society as a whole are indispensable to resolving the issue of decarbonization. This is a theme that can be achieved particularly by the Nippon Steel Group, as a leading steelmaker. We are a company that can make a significant contribution to improving the global environment by decarbonization. In order to continue to contribute to society and be needed by society, we will keep working on decarbonization as a top management priority.

The Nippon Steel Group is determined to seize global growth opportunities, become a pioneer in decarbonization, and take a giant step forward as the “Best Steelmaker with World-leading Capabilities.”
I sincerely ask for your support and cooperation.