January 4, 2024
JFE Steel Corporation

Mr. Kitano’s 2024 New Year’s Message to the JFE Team

New Year’s greetings to everyone.

I would like to begin by first expressing my deepest condolences to all who have suffered from the earthquake in Noto Peninsula, which struck on January 1, and to share my profound grief over the loss of many people who perished in the heartbreaking devastation. I hope that normal conditions are restored as soon as possible.

Next, I address the paramount issue of safety. Last year, we improved our safety statistics to the level of our previous record high, reflecting the effectiveness of the safety initiatives in which you all have participated. And yet, a serious accident occurred in one of our group companies last year, and a precious life was lost. This is truly regrettable, and I once again offer my deepest and most sincere condolences. We all must pledge to do everything possible to thoroughly prevent such accidents, including by strengthening our commitment to safety initiatives across the JFE group.

Looking back on 2023, while the impact of the COVID-19 pandemic began to ease, persistent global inflation dampened the economic recovery. In Japan, growth in steel demand faltered, partly due to the impact of labor shortages. Overseas, steel demand also continued to slow amid the prolonged Russia–Ukraine war and China’s economic stagnation.

Despite such challenges, earnings are set to improve year-on-year, and we expect to post our third consecutive annual profit thanks largely to everyone’s efforts to improve sales prices and reduce costs, primarily through structural reforms. This is the result of the hard work that you all steadily performed in your respective roles.

Looking ahead, while we expect steel demand to expand amid a global economic recovery and continued growth in emerging economies, market prices are likely to take time to bounce back. But we will closely monitor the global economic environment, including the inflation policies of respective nations and geopolitical risks such as those associated with the situation in the Middle East.

Priorities in 2024

We expect to post a profit this year, even amid a decline in crude steel volumes. Our efforts to transition from quantity to quality in line with our Seventh Medium-term Business Plan are moving ahead nicely and should continue to yield the desired results in the plan’s final year. As we complete the plan’s remaining initiatives, we expect to increase earnings further and exceed many of our targets.

We shut down upstream processes in the Keihin District last September. In 2024, the first year after our structural reforms, we will launch post-reform systems to make our operations even more competitive. By establishing new systems that take full advantage of our structural reforms, we expect to benefit from everyone’s dedicated efforts to implement our reforms, especially in Keihin.

We will also pursue carbon-neutrality initiatives and invest strategically in promising opportunities. In pursuit of carbon neutrality, we will continue to develop new technologies, invest wisely and expand sales of green steel. We will also invest strategically in capital equipment to produce high-value-added products and launch businesses in promising fields overseas.

By maximizing the efficiency of our post-reform systems and applying our advanced technological capabilities and the power of our people to the challenges of carbon neutrality and our overseas growth strategies, we expect to be better positioned to provide high-quality products as well as contribute to CO₂ emissions reduction.

There are four key priorities we will focus on this year.

First, we will establish a strong earnings base supported by new production systems. To maximize efficiency under our post-reform systems and ensure upward production flexibility, we will strive to maximize capacity and enhance productivity at all steel mills. Further, we will create highly competitive production and sales systems by completing the initiatives in the Seventh Medium-term Business Plan for increasing the ratio of high-value-added products in our mix as well as increasing order prime-quality yield (OPY). On the sales front, in addition to restructuring our product mix, we aim bring earnings more in line with the value we add, including by breaking free from the constraints of conventional sales and marketing practices to achieve greater profitability.

Second, we aim to increase our contributions to a carbon-neutral world. We set an interim goal to reduce CO₂ emissions by 18% below our FY2013 level as of FY2024, and now that year has arrived, so we need to work even harder to reduce CO₂ emissions. We will also aggressively promote the high environmental value of our JGreeX^™ green-steel products as well as work to develop and expand our customer base. In addition, we will install large, high-efficiency electric-arc furnaces and continue to develop innovative technologies for carbon-recycling blast furnaces and direct hydrogen reduction steelmaking. Efforts to develop promising new technologies will be supported by cooperation with the Japanese government and other companies. In addition, more concrete plans will be devised for the installation of a large, high-efficiency electric-arc furnace at Kurashiki, bringing our vision of carbon neutrality into focus.

Third, we will pursue a more sustainable growth strategy. This will include capital investments to expand production and sales of strategic products in growth areas, such as electrical steel sheets, to lay the foundation for long-term growth led by future generations. As part of our overseas growth strategy, we will continue to develop alliances for high-grade steel sales and raw material procurement. We will also continue to expand our global solutions business, a new area in which we expect to monetize knowledge, skills and data from our extensive business experience in Japan.

Finally, we will expand our use of digital transformation (DX) technologies. By deploying AI, IoT and other digital technologies, we expect to create productive, highly efficient workplaces for higher levels of value creation. We will continue to introduce cyber-physical systems (CPS) in all manufacturing processes and roll out digital technologies to transform a wide range of processes and teams beyond manufacturing. We will also further transition to open systems at our steelworks. Employees will be trained in new skills to improve our digital literacy across the board, not just for personnel in certain divisions, departments or job levels. Training programs will teach you about DX technologies to enhance your skills and help us to incorporate digital technologies to create smarter, more convenient and safer work environments.

This year, we will formulate our Eighth Medium-term Business Plan, which will set out our long-term vision and define the company we want to become. As all divisions and departments will be involved in formulating this plan, I want each of you to envision the future of your respective business unit and what you can do to help us achieve that vision.

2024 Action Plan

In this new year we must unite to build on the foundation of our structural reforms. You are our most important asset as well as the driving force behind our growth. Accordingly, we will implement initiatives to improve job satisfaction and motivate everyone to grow and develop as we pursue a bright new future. In this regard I would like to emphasize three points.

First, be courageous when problems arise. Globalization is ongoing and every industry is innovating to help create a carbon-neutral world. The road to opportunity will be full of challenges, so please study cutting-edge technologies, acquire new knowledge and tackle challenges courageously with new ideas. If you’re a manager or a leader, talk to your team about your vision for our company and your specific workplace. Provide challenging opportunities for your team members and then support and encourage their efforts. Celebrate the growth and development of our young employees. They need to learn all they can, accept challenges without fear, be willing to overcome setbacks, and never stop striving for new growth. Reward and praise employees for taking on challenges.

Second, employees need to think, speak and act on their own without prompting from others. Try to expand your knowledge not just within your comfort zone but across a wide range of areas. Sharpen your ability to think logically and identify the essence of any problem. Strengthen your communication skills, share your ideas widely and help others to understand your points of view, because our goals are more attainable when we work together toward a shared purpose. Take initiative and set a good example for your peers. Of course, taking action means you may experience failure from time to time, so be ready to correct your course and rethink your approach if necessary, including by talking with others before taking action.

Third, I encourage everyone to embrace our diversity and individual abilities. Diversity and inclusion are keys to managing the diverse and complex changes taking place in our business landscape. Different ideas and different values contribute to our innovation and enable us to deal with change. If you are a manager, help your team members develop their strengths and treat their diverse ideas as valuable assets. I want employees to personally recognize their individual skills and abilities and how to leverage them to achieve personal and company goals. Our workplaces must be vibrant environments where people are encouraged to pursue new ideas with vigor and to express ideas openly. We must also respect each other’s private lives and lifestyle choices.

Let’s make our families and society proud by providing safe workplaces where employees can function energetically and in good health. Safety must be promoted by the head of each site and district. Managers and supervisors need to communicate thoroughly with employees and subcontractors to confirm if a problem exists and, if so, to determine what needs to be done. Everyone involved must understand that safety is our top priority. If you are a frontline worker, always be thorough in everything you do, adhere strictly to our rules and see improvements through to completion. Remaining committed to safety is more important than anything else. Never fail to act when something needs to be done, and always maintain your discipline and initiative.

Our business depends on public trust. A single breach of compliance could irreparably damage that trust and, indeed, threaten the very survival of our company.

In closing

Finally, I have a message for our labor union. As we work to manage the enormous changes facing our company, the union’s understanding and cooperation will be essential. If we continue to work together and communicate closely, our company and all employees can continue to grow together as we pursue our transformation. I sincerely ask for the union’s continued support.

In conclusion, it gives me great pleasure to wish all of you and your families a fruitful, healthy and happy New Year, and I sincerely hope that you have a wonderful 2024.