• The US has been raising interest rates rapidly since March 2022 to control inflation, but is expected to start cutting rates in the second half of this year. However, the US domestic economy continues to benefit from an “America first” economic policy, and most expect no major recession in the foreseeable future.
• China’s economy, suffering from a real estate recession, is expected to slow down in 2024, although real GDP growth in 2023 was 5.2% year-over-year. Further, the fast-growing economies of the emerging nations known as the Global South are also predicted to be affected by soaring interest rates, exchange rate losses, and geopolitical risks, and are not expected to be strong enough to drive the global economy.
• [Steel demand in North America] Demand for steel rebar in the US in 2023 is expected to fall below 9 million tonnes (-3.5% year-over-year) to 8.95 million tonnes, partly due to the COVID-19 pandemic. However, it is expected to expand to 10.42 million tonnes in 2027 due to strong demand from infrastructure investment, population growth, and other factors. Canadian demand for construction steel in 2023 recovered from 2022, when it fell back due to the COVID-19 pandemic, to 1.56 million tonnes (+10.2% year-over-year). From 2024 forward, as well, the market is expected to experience moderate growth benefitting from an increase in the population, and construction steel demand is forecast to reach 1.62 million tonnes in 2026.
• [Steel demand in Vietnam] Construction demand in Vietnam in 2023 decreased significantly to 10.03 million tonnes (-9.5% year-over-year) due to a real estate recession that has continued since the second half of the previous year. However, although the impact of this recession is expected to linger up until the first half of 2024, we anticipate a gradual recovery. Stimulated by such factors as large-scale public investments from 2025 onward, especially in the north-central region, where development has lagged behind that of southern Vietnam, we predict that demand for steel will expand to its previous level of around 11 million tonnes.

In 1963, we were the first steel manufacturer using EAFs to expand overseas. Since then, we have done business in more than 20 countries, whether through building plants, providing technical guidance, or launching projects. We currently have three bases in Vietnam and two
in North America. We expanded into Vietnam in 1994 shortly after the Doi Moi economic reforms were initiated, and in addition to helping rebuild the country following the Vietnam War, we have earned a reputation of providing high-quality, Japanese products. We continue to boost local employment and improve the level of technology by doing business firmly rooted in local communities.

[Strengths]

• More than 50 years of history and results in doing business overseas
• Capability to diversify risks by having bases in both growth markets (Vietnam) and mature markets (US, Canada)
• Abundant opportunities to develop Group employees, through providing technical guidance and equipment investment locally

[Opportunities]

• Demand is expected to increase in both Vietnam and North America
• We will seek to improve our steelmaking business using EAFs’ position due to demands for carbon-neutral circular economies on a global scale
• There are few manufacturers in North America capable of producing fine rebar, which is a specialty of the Group

[Risks and challenges]

• Stricter competition as other companies in the same industry enhance capabilities in expectation of increased demand for steel as the Vietnamese economy grows
• Reaching carbon neutrality (increasingly stricter government environmental regulations)
• Difficulties reaching stable profitability due to factors such as dynamic market conditions and operational issues
• Plant equipment aging, safety measures

Following its second re-entry into the US in 2016, establishing a global tripolar structure consisting of Japan, Vietnam, and North America has been a major strategy for the Company. However, in light of the changing political and economic conditions in each region, the Company will shift the weight of its investment strategy to emphasize North America. The framework of the existing global tripolar structure will remain unchanged, but we will deploy our resources with an emphasis on North America, while in Vietnam, we will place greater focus on the northern part of the country.

Under NeXuS 2023, our challenge for our overseas steel business was to establish a stable profit structure due to its performance falling far short of plans and an apparent uneven distribution of profits. In the first year of the medium-term business plan, the slumping domestic steel business was supported by the overseas steel business, and our global tripolar structure functioned to a certain extent. From the second year onward, however, impacted by the local real estate recession, our business in Vietnam performed poorly, and in the third year, the overall overseas steel business was significantly in the red due in part to equipment trouble in our North American operations.

Under NeXuS II 2026, we recognize that the rebuilding our global tripolar structure is a top priority, and have decided to shift the weight of our investment strategy from the Vietnam business, where we have already made a set of large-scale investments, to our business in North American.

With regard to our operations in North America, Vinton Steel LLC will build a new steelmaking mill and partially remodel its steel rolling mill facilities to address facility aging, aiming to improve and stabilize profits by significantly reducing costs through improved productivity and increased production and shipment volumes.
These capital investments are planned at $230 million.
In addition, AltaSteel Inc. is currently working to build up its rolling facilities and begin commercial production of 10 mm rebar, with the goal of increasing production and sales starting in 2025.
With regard to our business in Vietnam, Vina Kyoei Steel Co., Ltd. will strive to improve its financial structure while avoiding chasing volumes and minimizing the impact on consolidated financial results so that it can operate stably in response to changes in market conditions. Vietnam Italy Steel JSC (VIS) will aim to develop a corporate structure that can generate stable profits through the vertical start-up of a new rolling line scheduled for FY2026. VIS will also strengthen cooperation with Kyoei Steel Vietnam Co., Ltd., a rolling mill company, to create an optimal production system for the two companies in northern Vietnam and evolve into a company that plays a central role in our operations in the country.