2017 New Year’s Message from Mr. Kosei Shindo, President to Employees
Jan. 04, 2017
Nippon Steel & Sumitomo Metal Corporation
2017 New Year’s Message from Mr. Kosei Shindo, President to Employees
To begin 2017, I would like to talk about our priority issue and how we are tackling them.
Reflecting on 2016, I must say that a lot of unexpected things did happen. The United Kingdom began its first step to withdraw from the European Union, and Mr. Donald Trump made a dramatic victory in the United States presidential election, defying polls. Behind such unexpected outcomes lie worldwide problems such as widening income gaps, the decline of the middle class, and immigrant or refugee issues. I believe that we could also say that the process of globalization, which put priority on financial aspects, led by the United States and since the end of the Cold War, has begun to unfold its contradictions and problems. This has led to emergence of an introverted attitude; many people now think only about the interests of their own country, and to a trend toward isolationism and protectionism. The global political and economic outlook has therefore become more and more uncertain.
In such a challenging environment, the year 2016 was truly a year of perseverance for the steel industry. We began the year by seeing some recovery in the steel market but from mid-year, the coal price surged and put downward pressure on the margin for steel. We also witnessed a sharp increase in anti-dumping, safeguard measures, and other protectionist moves. NSSMC also encountered quite a challenge in operating performance and had to forego the usual interim dividend payment.
I am extremely sorry that 13 serious accidents occurred in Japan’s steel industry. Seven were at NSSMC. This has led to setting up a public-private council under the guidance of the Ministry of Economy, Trade and Industry and other relevant ministries and agencies. Through participation to this council, we are objectively reviewing our present safety management status and improve our safety level.
Looking globally, some global initiatives began for certain common issues of the global steel industry in 2016. Specifically, a global forum was established to be concerned with the excess production capacity problem of China and other countries. Also, the Paris Agreement concerning the global climate change issue went into effect.
Coming back to 2017, I am anticipating that the environment surrounding the steel industry will continue to be severe. Material prices, for example, are likely to stay high, while excess production capacity persists. On the other hand, there are early signs for the market environment to reverse. We also began to see some tailwinds such as steady demand growth for middle- and high-grade steel materials in emerging countries such as in the ASEAN region, which we identify as one of our major markets. Such a positive trend is being driven by accelerating infrastructure spending and rising demand for high-performance materials associated with the advancement of industries.
In light of this view on the business environment, I would like to emphasize three priority issues for this year.
The first priority issue is to revamp safety. The NSSMC Group had promoted accident preventive measures in equipment as well as in training, setting-up of rules, and other aspects. Each steelworks had made renewed efforts to identify risks and had proceeded with preventive measures ceaselessly, resulting in steady decline in the accident frequency rate in recent years. Nevertheless, such achievement was virtually eradicated by seven serious accidents last year. We must seriously reflect on this grave fact. We must recognize that our entire company is literally in an emergency crisis mode in terms of safety.
I would therefore like to describe the new year to be “a year dedicated for safety enforcement.” I profoundly want us not to have any serious accident this year. In order to make this our real safety record, we will take five approaches, and plan measures and thoroughly execute them accordingly. These approaches are: to support priority workplaces which face serious safety issues; to accelerate making equipment inherently safe; to eliminate repetition of similar accidents; to establish or enhance special safety-related operations and the systems that support them; and to implement measures to improve safety levels of subcontracting companies.
Our second priority issue for 2017 is to complete the measures indicated in the current mid-term management plan. At present we are quite far from our ROS, ROE, and other financial targets set for fiscal 2017 in the ongoing plan. What I find important at this juncture is to fully accomplish the measures we had set for ourselves in keeping with our basic strategy. Let me discuss four points that are keys to accomplishing the measures and achieving their objectives.
The first thing we need to do is to achieve the targets for the second half of fiscal 2016 (ending March 2017). Specifically, stable operation and price improvement are most crucial. As for production and equipment, as each manufacturing base is virtually working at full capacity, I would like those of you concerned to keep operations stable and to operate capacity at maximum, achieve the planned technical parameters, and make sure to improve cost control. To those of you in sales and marketing, please work with your customers to help them understand us better and at the same time protect the margin that we earn.
The second thing I must emphasize is to enhance mother mills’ competitiveness with a focus on facility and workforce. In terms of facilities, I have perceived definite effects of our being highly conscious of efficiency, and completed relining plans and steady repair investment, which resulted in a decline in long-term idling of facilities, for example. This reinforces how important it is that we implement the measures to prevent and minimize troubles across the entire group and conduct comprehensive check-ups and maintenance that go one step beyond, in order to support stable production.
In terms of people, we have increased the number of newly-hired employees from 2016, and we have pursued efficiency at the same time. We intend to develop the new hires to become an effective part of our workforce early, provide some latitude in terms of personnel at workplaces, and smoothly hand over techniques and skills into a younger generation.
The third thing I want to discuss is to deepen our globalization strategy. I am pleased that our overall overseas business has become profitable. This partly stemmed from making operational indicators or key performance indicators (KPI) visible, and from more efficient and advanced overseas management teams. I would like you to continue your relentless efforts to further expand our profits, using your accumulated know-how.
The fourth thing we must continue is to maximize combined Group strength. In 2017, we plan to welcome a blast furnace integrated steel manufacturer Nisshin Steel to the NSSMC Group, assuming approval of the Fair Trade Commission. Once this materializes, we will further deepen coordination within the Group and generate synergies at an early stage under the best-for-the-Group strategy. Moreover, I am hoping that each of the non-steel business segments takes opportunities arising from changes in its sector and strengthens its operations. I would like you to make the most of your strength and know-how, so that they can be integrated for development of new products, for example, and raise our combined Group strength.
By focusing our efforts on the above four points, I hope that we can complete the current mid-term management plan and fortify our foundation.
Finally, this year’s third priority issue is to openly discuss our future direction and start exploring the next mid-term management plan, which is to start from fiscal 2018 (from April 2018), based on our fortified foundation.
The global steel industry’s competitive landscape is now on the brink of changing at breakneck speed. Bearing that in mind, we must flexibly and boldly study what we shall do in the future, with foresight regarding the next generation. Specifically I would like to start considering from the following four perspectives.
First is the perspective of technological development. Engineering and development capabilities are our source of competitiveness. With the aim for further enhancing this competitiveness, we will make develop technology, some of which will be looking ahead 10 or 20 years.
The second perspective is to devise business strategies by product type and region. In order to maximize the NSSMC Group brand, we will explore the strategies by product type and region. This includes, in case of our overseas operations, to be engaged in production and sales as a local business entity or as an insider.
The third perspective concerns our domestic steelworks and other production bases. Here, we will be unceasingly striving to enhance competitiveness, as we have done in the past. By making use of advanced IT tools and services, we will enhance equipment maintenance and operating capability, even in changing conditions or when the equipment has aged. Specific areas can include advanced diagnosis technology and enhanced predictive maintenance.
The last perspective concerns the software aspect in management. “Standardization” will be an initiative of the entire company. In my view, “standardization,” combined with IT innovative technology, will be a foundation that assures what next-generation management will be. This should support an optimal production framework and at the same time contribute to drastic operational improvement in human resource development, safety and quality management, and other areas. I believe that this should also contribute to raising our Group’s comprehensive capabilities, including our overseas operations.
In concluding my new-year greetings, I must warn you that 2017 may once again be a year of unexpected events. We now live in the world of uncertainties and it is harder than in the past to predict the future. Even in such an environment, I would like us to steadily move ahead, foreseeing changes in the big currents in politics, economy, and technology. As we all know, it means to demonstrate our determination to lead the world steel industry as a global company headquartered in Japan. Our initiatives to reline large facilities giving them a long life cycle and to hand over the long-inherited steel industry into the next generation can be described as the first challenge of its kind in the world history of the steel industry. The work of each of us is a part of an important work to build up assets for the next generation in the midst of such historical currents. I hope we all keep that in mind and work our daily assignment with pride.
