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News Release

January 4, 2010
JFE Steel Corporation

2010 New Year’s Message

Hajime Bada President and CEO, JFE Steel Corporation
Hajime Bada
President and CEO,
JFE Steel Corporation

New Year’s message from the CEO of JFE Steel Corporation
to JFE Steel and Group Company employees at the start of 2010

Assuring results in a rapidly changing environment

Happy New Year! I am pleased to send you my warmest greetings at the start of a new year.

No doubt, 2009 was the most challenging year in JFE’s history, the result of a global recession triggered by economic crisis from the fall of 2008. Sharp swings in the steel business forced us to implement unprecedented cuts in production in the first half of the year, although thankfully we managed to increase production in the second half.

During the year we responded to shifting demands by promptly idling blast furnaces, cut costs wherever possible and placed strategic emphasis on sales of high value-added products. These accomplishments would not have been possible without the cooperation of our employees and labor unions, for which I express my great appreciation.

In 2009 we introduced our three-year Third Medium-Term Business Plan, under which we are targeting 33 million tons in annual non-consolidated crude steel output as soon as possible. As part of this effort, we upgraded plants and equipment, in particular by enhancing production and on-site capabilities. We also strengthened human resource development, including by taking advantage of unused time to provide personnel with increased education and training, ensuring that production knowhow will be passed on effectively.

In addition to developing new export opportunities for more stable global sales, we achieved solid results with our overseas operations. Notable successes included paving the way for the production of automobile steel sheets by Guangzhou JFE Steel Sheet Company in China and the comprehensive collaboration with JSW Steel Ltd. in India.

As a result of such efforts, the JFE Steel Group developed new strengths in earnings capacity in 2009. We secured a net profit faster than our domestic rivals in the first half of the fiscal year, and we expect to realize consolidated ordinary income of 20 billion yen for the full year ending March 31, 2010.

Key issues in 2010

Although the economy is recovering, the risk of a double-dip recession remains high. Recent gains have been due largely to private inventory adjustments and public spending measures, so we can’t say for certain that the global recovery can be sustained when the effects of these measures begin to fade.

In our post-consolidation era we steadily increased production volume and earned strong profits, but then last year production and profits declined drastically. In this new year, we must make every effort to move measurably forward in our effort to return to strong profitability.

The first key issue in 2010 is to accelerate technological development. Asian rivals in countries including China and South Korea are fortifying their positions not only through increased production capacity, but also by steadily upgrading both quality and technology. Under our current business plan we aim to speed technological development with an eye on the horizon ten years from now, focusing especially on technologies that help to reduce CO2 emissions and conserve energy and resources.

The second key is to exploit new demand. Our company’s growth depends on how accurately we can read trends and exploit new demand, particularly in areas with high growth potential. Success or failure will be determined by how quickly we introduce high value-added products in Asian countries such as China, India and Southeast Asia, and in new energy fields such as wind power, solar power and electric cars. This will require a cross-organizational approach because by nature these kinds of products incorporate a wide range of knowhow, so I ask you to think beyond existing perceptions and structures to come up with original, innovative solutions.

The third key issue for JFE Steel in 2010 is to become as cost competitive as our Asian rivals. Up to now we have focused on minimizing the cost of operations by flexibly adjusting production to supply and demand. But in these uncertain times we must modify production volume even more quickly and flexibly to ensure that our cost-competitiveness not only remains No. 1 among Japanese mills, but also becomes the equal of our rivals in China and Korea. I ask all of you for even greater flexibility in helping us to adjust business whenever and however required, and to accelerate further cost cuts through innovation and ingenuity on a daily basis at all production sites. The drive to recover earnings as fast as possible also will require greater flexibility in the procurement of raw materials and use of less costly materials.

The implementation of such measures necessitates superior human resources. We will continue to foster employees who can contribute to our globalization and ensure that production personnel receive the special skills they need to take us into the future.

Safety and CSR: building blocks of our company

Our tireless dedication to safety and corporate social responsibility (CSR) are two key building blocks upon which JFE Steel stands. Our safety record improved significantly in both 2007 and 2008, but then it reached a standstill in 2009. To overcome this barrier and realize an even safer and more healthful work environment, each of our group companies and indeed every department in our group must continue to upgrade their facilities and operations. With the help of all employees, our goal of zero accidents is achievable.

The concept of CSR is now firmly rooted in our corporate culture and awareness continues to rise through ongoing education. Of course, CSR is a never-ending corporate pursuit, so I ask all employees to continue helping us fulfill this highly important part of our mission.

Constructive labor–management dialogue

To our union employees, I look forward to engaging in constructive dialogue with you again this year, and together rapidly confronting the challenges of our increasingly challenging business environment. Your continued understanding and cooperation would be deeply appreciated.

Proceeding steadily in both good times and bad

As we have seen over the years, business environments run hot and cold; booms never last forever. While it is necessary not to become overconfident in a booming economy, it is just as important to deal with an economic downturn calmly, without becoming pessimistic. It is wise to proceed steadily at all times, and never to stop making improvements as we work toward our goals.

One of our core aims is to make ourselves into a truly excellent company — one that stakeholders view as indispensable and employees take great pride in. Let’s all work together throughout 2010 to earn this kind of respect from our stakeholders and employees alike.

Very best wishes for a rewarding, healthful and happy year to all of you and your families!