January 7, 2019
JFE Steel Corporation

2019 New Year’s Message to Employees
Koji Kakigi
President and CEO, JFE Steel Corporation

Happy New Year and warmest greetings as we begin 2019!

First of all, I would like to say a word about safety. Two serious accidents occurred last year, and two precious lives were lost. It is truly regrettable. Let us pray for our lost colleague and honor him by remembering that “Safety takes precedence over all.” Please never forget the importance of communicating with your colleagues and working with safety always in the front of your mind, no matter what you are doing.

Looking back, last year was full of change, including the North Korea–United States summit and intensifying trade friction, but business conditions in the steel industry remained strong. While overproduction in China remained a challenge, Chinese steel producers did reduce production and decrease exports to some extent so market conditions were fair. Given this stable environment, it is unfortunate that due to unprecedented natural disasters including torrential rain in western Japan, problems caused by aging facilities and various human failings we could not make the most of all the opportunities we had. As a result, we fell short of our production and shipment targets.

We expect 2019 to be a steady year, but various uncertainties will continue to shape our operating environment. These will include import restrictions on steel products based on the U.S. Trade Expansion Act Section 232, trade friction between the United States and China, and higher costs due to rising raw material prices and distribution costs. With uncertainty growing, constant awareness that the world we operate in can change unexpectedly quickly, including in areas such as policies to accelerate the shift to electric vehicles and technological innovation driven by advancing IoT and AI, is essential.

Despite the uncertainties anticipated in 2019, we will steadily implement our sixth medium-term business plan and continue with efforts to reinvent our company as a global steel supplier that creates new value and grows with its customers, as stated in our long-term vision. Working with flexibility and speed, we will address the following four key issues this year, the second year of our business plan.

The first is building up manufacturing resilience. As we work to eliminate various problems at existing facilities and renew aging facilities to return to normal operations, we will also improve overall performance by increasing production capacity and expanding our range of high-end products to achieve continued growth. Toward this end, our sixth medium-term plan includes strategic investments. Meanwhile, given that operational disruptions at facilities have continued to occur, I ask everyone to make a special effort to achieve operational stability and avoid lost opportunities. Let’s maximize production and shipment, always thinking about new functions and technologies that will enhance our capabilities, even marginally.

Our second key issue is achieving greater cost advantages using advanced technologies across our full range including commodity and high value-added products. We need to get the most from our existing world-leading technologies and continue to develop new ones to help us respond proactively to changes and create new trends, and for sustainable growth. There are opportunities in environment-friendly production based on ferro coke, the use of data science for advanced IT technologies, and the incorporation of IoT and AI in robotics.

The third key issue is implementing sales and product strategies that closely align our comprehensive capabilities with customer needs. By helping customers solve problems we can enhance our status as supplier of choice. I am asking everyone to maximize sales volume in Japan and, for exports, utilize overseas strategic investments as well as the off-take agreement with Formosa Ha Tinh Steel.

The fourth key issue is effective use of personnel. We will continue to transfer technology and develop human resources in line with the last business plan. Given that we anticipate staffing shortages in the medium to long term, we must devise ways to reduce workloads. In addition to transferring skills to younger employees, we also will continue to standardize work with the help of advanced technology so that as many people as possible are capable of completing the same tasks.

Since work hours are limited and the progress of change never slows down, we want to create environments where employees can focus on creative work. With this in mind, we are delegating more authority to speed up decision-making. Also, we are reducing paperwork and materials required for meetings and decision-making. This includes revising procedures for the profit planning of each works, reducing the number of meetings and raising the minimum investment values that require approval by the Management Committee. In view of these initiatives, please keep the following points in mind:

The first crucial point is to carry out duties with speed and a sense of responsibility, mindful of the situation and priorities. Delegating authority will not only speed up decision-making, but having the decision maker also the implementer will also help clarify who is responsible. Taking excessive amounts of time can result in us missing opportunities.

I want everyone to clearly understand his or her responsibilities and then work responsibly but freely within that scope because I believe that doing so creates confidence and a sense of personal achievement.

The second point is to emphasize innovation. Although having a “Challenging Spirit” remains one of our corporate values, I would like our emphasis on it to be restored to the levels when we first launched JFE Steel. The average age of our workforce is already under 40 years old and getting younger. I want young employees to sensitively use their fresh and unique viewpoint to improve their jobs. An ideal workplace is one where young employees can take on challenges and grow without excessive fear of failure so our more experienced employees must be eager to engage and advise younger colleagues.

The third and final point is to emphasize more creative work. By reducing workloads and improving productivity through automation and robotic mechanization people should be able to think more about how to maximize value and, equally important, to look outward, not only inward.

I want us to become a company that makes its stakeholders, families and society proud. This means we must ensure safe workplaces. In this final year of consulting support from DuPont, as well as having both the operation department and the conservation department externally audited, we will further practice interactive patrol, disaster investigation and internal audit. We need to protect the mental and physical health of every employee, including by working closely with the office organization, occupational health staff and our health insurance association. To this end, we are utilizing IoT and AI to incorporate new safety and health methods. At the same time, each workplace needs to identify and resolve issues to become truly self-reliant. Moreover, very regrettably, we have not eliminated accidents, so please continue to focus on safety.

Last year saw an excessive number of compliance violations in Japan, shaking the foundation of trust in many products. We must never forget that an enterprise’s very survival can be threatened by neglecting essentials such as safety, disaster prevention and compliance.

Finally, I would like to say a word to our labor unions. In the face of many global uncertainties, we must be able to respond flexibly and quickly as well as grow sustainably. To that end, the cooperation of our labor unions has become more indispensable than ever before. I strongly hope that labor and management continue to communicate with each other and cooperate to achieve our mutual goals.

In closing, I sincerely wish you and your families a healthy and happy year in 2019.