Sumitomo Metals Reinforces Ties with, Sells Treasury Stock to Sumitomo Corporation

Sumitomo Metal Industries, Ltd. (Sumitomo Metals) and Sumitomo Corporation (Sumitomo Corp) have reached a basic agreement wherein Sumitomo Corp will invest 10 billion yen in the integrated high-grade seamless pipe joint venture in Brazil between Sumitomo Metals and the Vallourec Group. In addition, to further strengthen the ties between Sumitomo Metals and Sumitomo Corp, Sumitomo Corp has agreed to purchase 49.6 billion yen worth of Sumitomo Metals' treasury stock via a third-party allotment, while Sumitomo Metals will purchase 15 billion yen worth of Sumitomo Corp stock.

Sumitomo Metals and Sumitomo Corp share a wide-ranging strategic partnership based on the Sumitomo business philosophy of "placing prime importance on integrity and sound management." Sumitomo Metals' global business, including the Brazilian joint venture mentioned above, is becoming increasingly important as the Company pursues its strategy of sustained growth that emphasizes quality. Today's stock purchasing agreement will allow Sumitomo Metals to leverage Sumitomo Corp's strong overseas networks and deepen the cooperation between the two in growth markets.

1. Reinforcement of ties between Sumitomo Metals and Sumitomo Corp
(1) Joint venture in Brazil

1) Company name: Vallourec & Sumitomo Tubos do Brasil Ltda.
2) President: Otavio Sanabio
3) Business: An integrated steelworks that manufactures high-grade seamless pipes
4) Ownership: Vallourec group 56%; Sumitomo Metals approx. 39%; Sumitomo Corp approx. 5%
5) Cooperation with Sumitomo Corp:
The partnership with Sumitomo Corp should boost the marketability of Sumitomo Metals' seamless products. Utilizing the supply-chain management system developed by Sumitomo Corp and Sumitomo Metals will enable timely and stable supply of products to our customers.

(2) Recent examples of cooperation between Sumitomo Metals and Sumitomo Corp
Sumitomo Metals cooperates with Sumitomo Corp in a large number of areas, primarily in terms of sales.

1) Premium OCTG joints threading business in China: announced on March 28, 2007
(Vallourec's stake is 51%, Sumitomo Metals' stake is 34%, Sumitomo Corp's stake is 15%)
2) Crankshaft machining business in the U.S.: announced on August 31, 2007
(Sumitomo Metals' stake is 60%, Sumitomo Corp's stake is 40%)
3) Second crankshaft forging press line at Huizhou Sumikin: announced on November 9, 2007
(Sumitomo Metals' stake is 51%, TKC's stake is 34%, Sumitomo Corp's stake is 15%)

2. Third-party allotment of treasury stocks
(1) Goal of third-party allotment of treasury stock
Overseas operations are becoming more important, so Sumitomo Metals will allot treasury stock to Sumitomo Corp in order to leverage Sumitomo Corp's strong overseas networks and deepen the cooperation between the two in growth markets.

(2) Total funds procured and their usage

1) Total funds procured
49,694,040,000 yen

2) Usage of funds procured
The funds procured via the third-party allotment of treasury stock will be used to purchase Sumitomo Corp's common stock and for investment in businesses and equipment.

3) Expected period for spending of funds
February 2008 and beyond.

4) Rationale for the procured funds usage
The funds procured via the third-party allotment of treasury stock will be used to purchase Sumitomo Corp's common stock in an effort to deepen the relationship between Sumitomo Metals and Sumitomo Corp, as well as for investment in businesses and equipment. These things are in line with Sumitomo Metals' strategy, and they will boost corporate value.

(3) Results and equity financing over the last three years

1) Consolidated results over the last three years

2) Shares outstanding and latent shares

3) Treasury shares to be allotted

4) Equity financing over the last three fiscal years
Not Applicable

5) Recent share price trend

(4) Principal shareholders and their stakes before and after allotment

*1 Sumitomo Corporation's voting rights stake will be 9.92% after allotment.
*2 On December 19, 2007, Sumitomo Metals announced that it had reached an agreement with Nippon Steel Corporation and Kobe Steel, Ltd. regarding additional cross-purchasing of shares designed to expand cooperation among the three companies. Under this agreement, Nippon Steel Corporation's stake is expected to rise to approximately 9.4% (a 9.9% voting rights stake), while Kobe Steel's stake is expected to rise to 2.4% (a 2.5% voting rights stake).

(5) Expected impact on earnings
The effect of the allotment of treasury stock on both consolidated and non-consolidated earnings for the fiscal year ending March 31, 2008 is expected to be minimal.

(6) Rationale for allotment terms

1) Why allotment price is seen as reasonable
The allotment price is the average TSE closing price (excluding fractional amounts) for the five business days immediately prior to the date of the Board of Directors resolution (that is, from January 24, 2008 to January 30, 2008). Sumitomo Metals sees this method as reasonable because it is based on recent market prices.

2) Why allotment quantity and subsequent dilution is seen as reasonable
Sumitomo Metals expects little dilution or impact on secondary markets as treasury stock to be allotted accounts for 2% of outstanding shares.

(7) Reasons for selection of recipient

1) Overview of recipient (as of March 31, 2007)

2) Reasons for Selection of Recipient
Overseas operations are becoming more important, so Sumitomo Metals will allot treasury stock to Sumitomo Corp in order to leverage Sumitomo Corp's strong overseas networks and deepen the cooperation between the two in growth markets.

3) Recipient's shareholding policy
Sumitomo Corp has told Sumitomo Metals that it will hold onto Sumitomo Metals' shares for the medium- to long-term in order to deepen the relationship between the two companies.
Sumitomo Metals expects that Sumitomo Corp will soon agree to report to Sumitomo Metals in writing should it decide to sell all or part of its allotted shares during the first two years after the date of allotment (scheduled for February 20, 2008).

3. Purchase of Sumitomo Corporation's stock
(1) Amount to be purchased: 15 billion yen
(2) Timing of purchase: On or after February 1, 2008
(3) Method of purchase: Market purchase
(4) Shareholding policy: Sumitomo Metals will hold the purchased shares for the medium- to long-term in order to deepen the relationship between the two companies.

(Appendix) Outline of treasury stock allotment

(1) Number of shares to be allotted: 96,120,000 shares
(2) Allotment price: 517 yen per share
(3) Value of shares allotted: 49,694,040,000 yen
(4) Method: Third-party allotment
(5) Allotment date: February 20, 2008
(6) Treasury stock remaining after allotment: 166,458,416 shares
(Not including fractional purchases or sales after October 1, 2007)