• 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 adeclining population, and decreasing demand as well as labor shortages due to the reduction in the workingage population will become realities.
• The massive fiscal spending in response to the COVID19 pandemic has caused inflation to rise worldwide and prices to increase across the board. Japan has also been affected, moving away from its negative interest rate policy, necessitating management that is cognizant of interest costs in all economic activities.
• The impacts of the COVID19 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 sales and 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 for semiconductors and the mainstay product steel rebar

• Manufacture and sell products with added value, including high-strength steel rebar and threaded-type rebar, etc.
• Production of high-strength shear reinforcement bars from base material 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 of global 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]

• Reduced demand in medium to long term
• Increase in steel scrap prices due to trends in CO2 emissions reduction; potential procurement issues
• 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 FY2022, the trading price gap (the difference in product price and raw materials price) narrowed as steel scrap prices remained on an upward trend. As a result, we fell short of our targets in the medium-term business plan. From FY2023, however, we have been able to secure a high level of profit due to an increase in the trading price gap as a result of efforts to raise product prices.
In FY2024, while maintaining the trading price gap, both production and shipment volumes exceeded those of the previous period, resulting in further increases in both sales and profits compared to the previous year, significantly exceeding the targets of the medium-term business plan.
In addition, as part of our efforts to build a comfortable working environment, one of the policies in our medium-term business plan, we made progress in streamlining and improving efficiency, with examples including the Hirakata Division’s new warehouse equipped with automated systems coming online, and the introduction of robots in front of the furnaces at the Kanto Division. We also completed construction of a new welfare building at the Kanto Division, as well as a new office at the Nagoya Division. Through these measures, we have endeavored to improve working environments.

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.