January 4, 2023
JFE Steel Corporation

Mr. Kitano’s 2023 New Year’s Message to the JFE Team

Happy New Year and warmest greetings to everyone.

I would like to begin by immediately addressing the paramount issue of safety. Regrettably, a precious life was lost in one of our workplaces last year. It was truly regrettable because such incidents never should happen. I again offer my very deepest and very most sincere condolences. We all must pledge to do everything possible to prevent such accidents going forward.

As the CEO of a responsible member of society, I am taking renewed responsibility to ensure that our workplaces are environments where you all can work safely. I will continue to promote and strengthen our safety initiatives based on the basic principle of safety taking precedence over everything else.

Looking back on the past year, as the impact of the COVID-19 pandemic began to ease, the global economy recovered and the Japanese market was stable. Conditions worsened in our export markets, however, due to higher prices for resources and energy due to Russia’s aggression in Ukraine and supply chain disruptions.

But despite such challenges, we expect to achieve segment profit for the second consecutive year, thanks largely to everyone’s efforts to improve sales prices and reduce costs in line with our 7th Medium-term Business Plan.

Although the Japanese economy continues to recover gradually, the global economy is showing increasing signs of slowing down as a result of energy-supply constraints and monetary tightening to counter inflation. We will continue to closely monitor the global economic environment, including the situation in Ukraine and government policies aimed at stabilizing inflation and financial conditions.

Priorities in 2023

Although we are expecting a profit again this year, much of this will come from contributions beyond our control, such as gains in inventory valuations. As such, it must be said that we still have work to do in order to boost our real earnings capacity, so we plan to step our transition from quantity to quality, as targeted in our business plan, in order to achieve world-class competitiveness.

In particular, 2023 will be a year of structural reform for us. These reforms will enable us to catch up to competitors by realizing world-class profitability, including by cutting costs, enhancing productivity through restructured operations, and more. I call on everyone to support us in achieving these structural reforms to enable us to improve our earnings.

To remain internationally competitive, we also will continue pursuing carbon neutrality by developing all-new technologies and implementing measures to being marketing green steel.

Our plan is to allocate resources across the group, placing a strategic focus on efficiency, predominantly through structural reforms. But we also will maximize our technological capabilities, make further advances with carbon-neutrality, and seize growth opportunities overseas. We expect such efforts to help us realize world-class per-ton profitability and gain the respect and trust of our customers as a company in tune with the environment as well as the times.

So now, please allow me to explain the four main priorities I want you to focus on this year.

First, we will rebuild our production systems and pursue world-class profitability through the aforementioned structural reforms, which we hope to complete by September. Simultaneously, we will take steps to facilitate a smooth the transition to our new systems. This will include relocating certain manufacturing operations and establishing a new logistics system. We also will strive to increase crude-steel and hot-rolled steel production capacity under a new system, as well as establish a more stable and productive structure by strengthening our repair and renewal of old coke ovens. Additionally, all divisions and departments will be asked to support productivity enhancement for improved efficiency. In sales, we will strengthen our product mix as well as our pricing structure to reflect not only increased prices of raw materials and other commodities but also the added value we deliver to customers.

Second, we will strive for the lofty goal of carbon neutrality by 2050, including the interim goal of reducing CO₂ emissions in FY2024 by 18% below our FY2013 level. This will involve various measures, including reducing our hot metal ratios, improving our blast furnace reduction efficiency, and saving energy. We also will deploy large, high-efficiency electric-arc furnaces and develop ultra-innovative technologies, including carbon-recycling blast furnaces and direct hydrogen-reduction steelmaking. Initially we will construct test furnaces in partnership with government bodies and other companies with support from Japan’s Green Innovation Fund, striving to develop technologies that are superior to those of foreign steelmakers. Also this year, we will take steps to build a supply system in order to launch sales of green steel products manufactured with low-carbon technologies, aiming to offer high environmental value that customers are increasingly demanding.

Our third priority this year will be growth in markets outside of Japan. As these markets shift toward carbon neutrality, we are seeing increasing demand for high-grade steel products, such as electrical steel sheets for electric vehicles and more efficient power generation. The strategy is to expand our sales of high-grade steel products through closer alliances with global manufacturers. We will also plan to continue expanding our global solutions business to sell the knowledge, skills and data from our business experience in Japan.

And finally, we will expand our deployment of DX technologies. For example, we will install more sensors in production facilities and use advanced modelling technologies to better visualize operating conditions. We will also continue introducing cyber-physical systems (CPS) on all production lines. In addition, we will carry out further operational reforms at our steelworks and upgrade systems by shifting from hosted to open systems. As we roll out new DX technologies, we also will train employees in new skills, including to nurture data scientists and improve everyone’s digital literacy. I encourage all of you to actively participate in our training programs to learn about DX technologies and thereby enhance your skills. Please support our efforts to incorporate DX technologies in our work processes to help us realize highly productive, convenient and safe workplaces.

2023 action plan

As we mark the 20th anniversary of our founding in this milestone year, we plan to take great strides toward an all-new era for our company. This will be our biggest-ever transformation, so everyone must be involved and I am looking forward to seeing how all of you take on the challenges. In this regard, I would like to emphasize three points.

First, I want you to maintain a challenging spirit in tackling problems as they arise. The world itself is in the midst of a huge transformation, including in terms of carbon neutrality, global markets and new technologies. Please do not be afraid of these changes. Instead, view them as opportunities to learn about cutting-edge technologies, acquire new knowledge and adopt as well as innovate new ways of doing things. If you’re a manager or a leader, talk with your team about your vision for our company as well as your specific workplace. Assign people tasks that will challenge them, and then support and praise them for their efforts. Young employees are the future of our company, so I want them to accept challenges without hesitation, learn from any failures, and never stop striving for new growth. JFE Steel must be a company that rewards its employees for taking on challenges with enthusiasm.

Second, I want employees to think, speak up and act on their own initiative, without needing to be prompted by others. Stay alert and actively learn everything you can in each job, and then use those learnings to decide what needs to be done. Also, please make an effort to sharpen your communication skills, interact with others more, and put your ideas into action by working together and sharing your thoughts. Of course there will be times when things do not go as planned because of changes in the situation around you or the external environment, but don’t let that ever stop you from moving forward. Don’t be afraid to use you own judgement and then confront problems as you see fit. The fresh ideas and perspectives of young colleagues are invaluable, so I call on everyone, including younger personnel, to think about your respective positions and make your presence felt through effective communication and personal initiative.

And third, I would like each of you to demonstrate your individual abilities and diversity. We are actively promoting diversity and inclusion as a key strategy. Combining diverse ideas and different values leads to innovation, so if you are a manager, please respect the diversity of people and ideas your workplace and treat them as assets. I want employees to understand how they can contribute to our company with their individual skills and abilities. Managers should encourage people to act on new ideas with vigor and to openly communicate ideas in order to contribute to innovation.

Together, let’s make our families and society proud by ensuring that we have safe workplaces where employees can work vigorously and in good health. Safety must be promoted by the head of each site and district, with managers and supervisors communicating thoroughly with employees as well as subcontractors to confirm if there are any problems and, if so, what needs to be done. It is also important to go back to the basics in order to implement our 5S principles and other accident-prevention efforts, treating such matters as if it were your very own business. Please never compromise the crucial needs for thoroughness, discipline and self-initiative.

Our business depends vitally on society’s trust. Even just one compliance violation could irreparably harm that trust and indeed threaten the very survival of our company.

In closing

Finally, I wish to directly address our colleagues in the labor union. As we work to address the huge changes that our company is facing, the union’s understanding and cooperation are more necessary than ever before. If we can continue to work together and communicate closely, I believe we can continue to grow in the midst of our transformation, so I sincerely ask for the union’s continued support.

In conclusion, I am very pleased to wish all of you and your families a fruitful, healthy and happy New Year and my sincere hope for a wonderful 2023.