• Climate change has resulted in the frequent occurrence of natural disasters over the past few years as well as heat waves and other abnormal rises in temperature in countries around the world. These phenomena, in turn, have created a heightened sense of crisis among people regarding global warming, and humankind as a whole is becoming increasingly concerned about efforts to realize a sustainable society. This includes with regard to corporate social responsibility initiatives aimed at such targets as realizing a decarbonized society and making the shift to renewable energy.
• Japanese society has transitioned from an aging society to one with a declining population, and decreasing demand as well as labor shortages due to the reduction in the working age population will become realities.
• Growing momentum for wage rises at Japanese companies has come on top of increases in global energy prices and increases in import costs due to the weakening yen. Accordingly, with prices rising in Japan and Japan itself suddenly finding itself in a world with interest rates, it has become necessary to operate with an awareness of interest rate costs in all spheres of economic activity.
• The impacts of the COVID-19 pandemic on our society have also significantly affected globalization and the way we work, further accelerating the trend of digital transformation (DX) as well as the emergence of generative AI such as ChatGPT.

Our Domestic Steel Business is a resource circulation business which melts down steel scrap using an EAF to produce new steel products. The Company boasts the top share in Japan in terms of production volume of its mainstay product of concrete reinforcing steel bars, which are essential in social infrastructure, such as buildings, apartments, bridges, and roads.

[Strengths]

• Operates business in Kanto, Chubu, Kansai, Chugoku, Shikoku, and Kyushu areas, where steel scrap is produced and there is high demand in Japan

1. Possible to speedily deploy a business strategy that utilizes salesand purchasing information in each area
2. Possible to speed up technological capabilities enhancement by horizontal deployment of technology information
3. Possible to perform alternate production during emergencies forsemiconductors and the mainstay product steel rebar

• Manufacture and sell products with added value, includinghigh-strength steel rebar and threaded-type rebar, etc.
• Production of high-strength shear reinforcement bars from basematerial to processing entirely within the Group
• Operational technology that can achieve stable production of steel products that fulfill standards from low-quality steel scrap

[Opportunities]

• Steelmaking business using EAFs will expand through demands ofglobal carbon neutrality and the circular economy
• Demand for rebar will continue to a certain extent because of the need for the upgrade of social infrastructure
• Demand for rebar which can be produced at low cost using abundant raw materials (steel scrap), will continue, as there are few alternatives to construction steel

[Risks and challenges]

• Medium- to long-term decrease in demand due to declining Japanese population
• Increase in steel scrap prices due to trends in CO2 emissions reduction; potential procurement issues
• Extension of construction times arising from reform of workstyles of construction sites and shift to steel frame construction to compress construction times
• Response to new construction methods
• Difficulty in securing labor due to decline in working-age population
• Wear and deterioration of factory facilities

On March 31, 2024, the Company merged with Kanto Steel Ltd., transforming it into the Kanto Division and resulting in a total of four divisions in Japan. The purposes of this merger were twofold: 1) Business continuity planning (BCP)—To build a stable supply system through coordination between four divisions; and 2) To enhance the Company’s presence in the Kanto region, which is the area in Japan in which demand for the Company’s products is greatest.

In order to build a solid foundation for our four divisions in Japan, we will strengthen cooperation among them and increase our presence in the Kanto region, the area with the greatest demand for our products. We will also strive to expand sales of value-added products, such as the high-strength rebars manufactured at the Nagoya Division. As part of our efforts to diversify raw material procurement and other upstream strategies, we will strengthen our scrap procurement function by establishing a satellite yard centered on Group company KYOEI MATERIAL, Inc. We will establish a new engineering division in the Production Planning & Coordination Department to ensure constant, safe, and stable operations at domestic and overseas production sites. Further, following on from NeXuS 2023, we will continue to streamline and improve efficiency to address labor shortage issues, including the introduction of automatic temperature measuring and analysis equipment in steelmaking mills and sampling robots in steel rolling mills.

As domestic demand fell due to the 2024 Problem (labor shortages among frontline construction and logistics workers and workstyle reforms) and delays and extension in construction times due to extreme heat, the Company capture 18% or more market share while maintaining the trading price gap (the difference in product price and raw materials price). We strengthened our steel scrap procurement capabilities by purchasing Toyo Company, Ltd., which operates a scrap business, in addition to opening a satellite yard for shipping steel scrap in Chita, Aichi.
     To contribute to the permanently safe, secure and efficient operation of our domestic and international manufacturing locations, we established an Engineering Section, and had a specialist team perform facilities and operations diagnostics.
     We also launched Ethical Steel as our brand strategy, seeking to improve the reputation of the Company as a business that contributes to a resource recycling society, thus increasing shipments.