Nippon Steel Group Medium-to Long-term Management Plan
TYO: 5401OTC: NPSCY(ADR)Nippon Steel GroupMedium- to Long-termManagement PlanMarch 5, 2021The financial figures in this document are consolidated, unless otherwise noted.
Table of Contents2 The main points of the Management Plan 1) Rebuilding our domestic steel business 2) Promoting a global strategy to deepen and expandour overseas business 3) Nippon Steel Carbon Neutral Vision 2050- The Challenge of Zero-Carbon Steel 4) Promoting DX strategies Investment Plan (FY2021-2025) and FY2025 financial targets AppendixAbbreviations:BF: Blast Furnace, BOF: Basic Oxygen Furnace, BT/Y: Billion Tons per Year, DX: Digital Transformation,EAF: Electric Arc Furnace, MT/Y: Million Tons per Year 2021 NIPPON STEEL CORPORATION All Rights Reserved.
3The main points of the management plan 2021 NIPPON STEEL CORPORATION All Rights Reserved.
The main points of the management planSteel S&D environment Decline in domestic steel demand anddeterioration of profitability of exports from JapanIncrease in demand for high-grade steel due togrowing social needs such as decarbonizationIntensification of competition in the overseasmarket due to expansion of capacity in emergingmills in East Asia coastal areaIncrease in global steel demand particularly inAsiaHeightened material to steel products marketvolatility, driven by the S&D in China, whichrepresents a majority of the world material tosteel products market4Four pillars of the management plan1.Rebuilding our domestic steel business Concentrated production through selection ofcertain products and facilities Higher-level order mix Renewal and improvement of facilities2. Deepening and expansion of overseas business Toward 100 MT of global crude steel capacity3. Taking on the challenge of Zero-Carbon SteelClimate change Climate action plans are globally becoming anall-out battle, participated by public and privatesectors of each country.The realization of zero-carbon steel will berequired as a part of industrial competitiveness. Carbon neutral by 20504. Promoting DX strategies Accelerated decision-makingEnhanced problem-solving capability 2021 NIPPON STEEL CORPORATION All Rights Reserved.
5Financial targets (FY2025)Aim at achieving profit level needed for the following: Generate cash needed for dividends, capital expenditures and business investment for growth Be prepared for a worsening business environment and a full-scale investment in zero-carbon steelafter FY2025 Ensure sufficient financial strength (international credit rating of “A”)FY2025 targetsROS (Business profit/Sales)ROE (Return on Equity)D/ECf. FY2020 2H(f)Approx.10%5.2％Approx.10%Approx. 6％0.7 or lessApprox. 0.7Stay below the current level even when thebusiness environment further deterioratesAssumptions FY2025 non-consol. crude steel production: 38 MT/YCf. FY2018-2020 mid-term management plantarget: 45 MT/Y (ex. 3 MT/Y in Kure) 2021 NIPPON STEEL CORPORATION All Rights Reserved.
61) Rebuilding our domestic steel business 2021 NIPPON STEEL CORPORATION All Rights Reserved.
Rebuilding our domestic steel business: Basic policies 7 External factors: Decline in domestic steel demand and deterioration of profitability ofexports from Japan expected in long-term aspect Internal factors: CAPEX expected to remain high, including refurbishment of aging facilities It is impossible to revitalize the domestic steel business with a simple shrinking equilibriumWe aim to grow by rebuilding our domestic steel business and expanding value providedto the market through rebuilding the domestic steel business with “higher-level ordermix”, “renewal and improvement of facilities”, and “concentrated production”.Selective concentration oncertain products and facilitiesConcentratedproductionBuild an optimalproduction frameworkHigher-level ordermixAggressive investmentin strategic productsRenewal andimprovement offacilitiesEfforts to make technologicalstrength lead to profit generation 2021 NIPPON STEEL CORPORATION All Rights Reserved.
Realization of an optimal production framework8ConcentratedproductionSelective concentrationon certain products Selective concentrationon certain facilitiesReduce commodity-grade product ratioBreak away from the business model ofmaintaining facilities on the premise ofcontinuing low-profit exports Concentrate production onmore competitive linesShut down inferior linesthrough production facilitystructural measuresOptimization of capacity level and fixed cost levelBuilding of a new hot-dipgalvanizing lineMeasures to improve the capacityBuilding of a nextand quality of electrical steel sheetsgeneration hot strip mill Invest in strategic products toimprove capacity and qualityRaise the ratio of high-valueadded productsImprove marginal profit per tonHigher-level order mix Selectively invest in more competitivefacilitiesImprove productivity, reduce cost, andrealize profitable structureRefurbishment of BFsRefurbishment of coke ovensRenewal andimprovement of facilities 2021 NIPPON STEEL CORPORATION All Rights Reserved.
9Production facility structural measures (downstream lines)Steel platebusinessFurther improve utilization rate and productivity to strengthen the businessShut down the steel plate mill in the East Nippon Works Kashima Area Transfer its production to the steel plate mills in the East Nippon Works KimitsuArea and the Kyushu Works Oita AreaSteel plate lines: currently4 lines 2 linesKyushu WorksEast Nippon WorksEast Nippon WorksOita AreaKimitsu AreaKashima AreaShutdown by around 2HFY2024(announced this time)Nagoya WorksShutdown by around theend of FY2021(moved up the schedule inNov. 2020, from the initialannouncement in Feb,2020) 2021 NIPPON STEEL CORPORATION All Rights Reserved.
10Production facility structural measures (downstream lines)ConstructionproductbusinessImprove utilization rate and productivity to strengthen the businessShut down the large shape mills in East Nippon Works Kimitsu Area and Kashima Area,products of which are mainly normal size Transfer their production to the mills at the Kansai Works Wakayama Area (Sakai) and theKyushu Works Yawata Area, in which differentiated shape products are manufactured.Also shut down the continuous casting machine, which manufactures large-shaped slabs, atthe East Nippon Works Kimitsu AreaLarge shape lines: currentlyKyushu WorksYawata AreaSpiralpipeLargeshapeRailsSheet piles4 lines 2 linesKansai WorksWakayama Area(Sakai)Large shapeEast Nippon WorksEast Nippon WorksKashima AreaWeldedlightweightH-beamsLarge shapeKimitsu AreaSpiralLarge shapepipe Senior to mega size Junior to senior size NS Hyper BeamTM SMartBEAMTM Standard H-beamsMega NS hyper BeamTMStandard sheet pilesHat-type sheet pilesShutdown by around theend of FY2024(announced this time) Junior size Standard H-beamsStandard sheet pilesShutdown by around theend of FY2021(announced this time) 2021 NIPPON STEEL CORPORATION All Rights Reserved.
11Production facility structural measures (downstream lines)Seamless pipe businessOptimize and improve efficiency of the production frameworkShut down the West small-diameter seamless pipe mill in the Kansai WorksWakayama Area (Kainan), out of the two mills, East and WestSeamless pipe lines: currently 3 lines 2 linesKansai Works Wakayama AreaKansai Works Wakayama Area(Wakayama)Small diameter East(Kainan)Small diameter WestShutdown by aroundthe end of FY2025(announced this time)BrazilVSBTo be sold by around theend of FY2020(announced on Feb, 2021)Large-diameter pipe(UO) businessWithdraw from the large-diameter pipe (UO) business, as it has noprospects for profit recovery, given the demand outlookShut down the UO steel pipe line at the East Nippon Works Kimitsu Area.UO pipe lines: before Oct. 2019 2 lines currently1 line 0East Nippon WorksEast Nippon WorksKashima AreaKimitsu AreaAlready shutdown in Oct. 2019Shutdown by around the end of FY2021(Announced this time) 2021 NIPPON STEEL CORPORATION All Rights Reserved.
12Production facility structural measures (downstream lines)Steel sheetbusinessConcentrate orders into competitive production linesBecome more oriented toward production close to centers of demandPickling and Galvanizing linesShut down some facilities of the hot-dip galvanizing line at the East Nippon Works Kimitsu AreaShut down some facilities of the pickling line at the Kashima Area Transfer production to lines in the East Nippon Works Kimitsu Area and at the Nagoya WorksShut down some facilities of the hot-dip galvanizing line at the Setouchi Works Hanshin Area(Sakai) (No.1 hot-dip galvanizing line, No.1 hot-dip galvanizing and aluminizing line) Transfer their production to other lines at Sakai and the Kyushu Works Yawata Area.High-carbon steel sheet linesShut down all facilities of Setouchi WorksHanshin Area (Osaka) (Electrolytic cleaning line,Annealing and processing line, temper rolling line,No.1, 2, and 3 slitter lines, sendzimir rolling mill)Bases where high-carbon steel sheets are manufacturedSetouchi WorksHanshin Area(Sakai)Kyushu WorksYawata AreaShut down all steel sheet lines at the Kansai Works Wakayama Area High-carbon products will be manufactured at two bases, theSetouchi Works Hanshin Area (Sakai) and Kyushu Works Yawata Area.Setouchi WorksHanshin Area(Osaka)Shutdownstep by stepKansai WorksWakayamaAreaShutdown byaround the endof 1H FY2024 2021 NIPPON STEEL CORPORATION All Rights Reserved.
13Production facility structural measures (downstream lines)Titanium and specialstainless steel* businessIncrease efficiency of the special stainless steel sheet manufacturingShut down the special stainless steel sheet manufacturing facilities at the East Nippon WorksNaoetsu Area Our production of special stainless steel sheet will be transferred to Nippon SteelStainless Steel Shunan Area Yamaguchi Works.*Special stainless steel - Ultra-thin stainless steel plate used for automotive parts, electronic devices, andother precision processing fields (plate thickness approx. 0.2mm)Improve efficiency of the titanium production frameworkShut down the titanium raw material plant at the Kansai Works Osaka AreaStainless steel businessEstablish efficient stainless steel sheet production frameworkStainless steel businessShut down the cold-rolling and annealing lines at Nippon Steel StainlessSteel Kinuura Works (All production facilities at the Kinuura Works are tobe shut down, including a shutdown of its hot strip mill as announced in2020.) Consolidate orders to Nippon Steel Stainless Steel Yamaguchi WorksShut down some cold-rolling and annealing facilities at Nippon SteelStainless Steel Shunan Area Yamaguchi Works and Kashima Works.Consolidate upstream facilities for stainless businessShut down an EAF out of two at the Shunan Area Yamaguchi WorksConsolidation of upstream facilitiesNippon Steel Stainless SteelShunan AreaHikari AreaYamaguchi WorksYamaguchi WorksShut down anEAF by aroundthe end ofFY2023KyushuWorksYawataArea 2021 NIPPON STEEL CORPORATION All Rights Reserved.
14Production facility structural measures (upstream facilities)Shut down one series of upstream facilities at the East Nippon Works Kashima AreaTaking into consideration the upstream facility balance after the shutdown of the steel plate mill and largeshape mill at the East Nippon Works Kashima Area, as well as the area’s integrated production and shippingcapacity costs, and among other factors, the No. 3 BF and related facilities will be shut down.Shutdown by around the end of FY2024No. 2-A, B,C, D cokeovenNo. 3sinteringmachineNo. 1-E, FNo. 2-Ecoke ovenNo. 2sinteringmachineNo. 3 blastfurnaceNo. 1steelmakingplantNo. 1 castinglineLarge shape millNo. 2 castinglineSteel plate millCold-rolling,annealing, andplating linesNo. 1 blastfurnaceNo. 2steelmakingplantNo. 3 castinglineNo.1Pickling lineHot strip millShutdown by aroundthe end of 1H FY2022Advance shutdown schedule for the upstream facilities in the Kansai WorksWakayama AreaShut down the currently suspended facilities (No. 1 blast furnace, No. 5 coke oven, No. 5-1 sinteringmachine) by around the end of 1H FY2021 (moved up from around the end of 1H FY2022) 2021 NIPPON STEEL CORPORATION All Rights Reserved.
Establishing an efficient production framework(upstream process)15Change in the supply arrangement of steel billets to the East NipponWorks Kamaishi Area and partial steelworks reorganizationChange in the arrangement to supply steelbillets for wire rods to the Kamaishi AreaCurrentlyMainly supplied from the Kimitsu Area. From 2025The main supply base will be changed tothe Muroran WorksSteelworks reorganizationAlong with the change in the supplyarrangement of steel billets, the steelworksorganization will be changed as followsCurrent organizationMuroran WorksEast Nippon WorksKimitsu AreaKashima AreaKamaishi AreaNaoetsu AreaNippon Steel’s bar & wire rod business basesNorth Nippon WorksKyushu sEast Nippon WorksFrom April 2022 (plan)North Nippon WorksMuroran AreaKamaishi AreaEast Nippon WorksKimitsu AreaKashima AreaNaoetsu AreaSteel billetssupplyKimitsuAreaKansaiWorksNagoyaWorks 2021 NIPPON STEEL CORPORATION All Rights Reserved.
Production facility structural measures16Total effect by measures already announcedand measures announced this time combined Total number ofBFsAnnual crudesteel productioncapacityCost reductionImprovement oflabor productivityShutdown5 unitsdomestic BFs15 10 unitsAlready-announced: Kokura BF, Kure No.1 and 2 BFs,Wakayama No.1 BFAnnounced this time: Kashima No.3 BFReduction10 MT/YApprox.-20%Crude steelproduction capacityNon consol. Nippon Steel Stainless Steel50 40 MT/YListed above Announced this time; Nippon Steel Stainless Steel Shunan EAF 150 bil/YReduction ofessential personnel20% or moreFrom FY2021 to the end of FY2025Reduction by production facility structural measures and DX measures etc. all combined(Nippon Steel contractors) 2021 NIPPON STEEL CORPORATION All Rights Reserved.
Outline of production facility structural measures ilities for shutdownApproximate time ofshutdown( : completed)NewEast Nippon Works Kashima AreaOne series of upstream facilities(No.3 BF, No.2-A,B,C,D coke ovens, No.3 sintering machine,and No.1 steelmaking plant)The end of FY2024NewEast Nippon Works Kimitsu AreaNo.1 continuous casting machineThe end of FY2021Currently-suspended facilities in one series of upstreamfacilities (No.1 BF, No.5 coke oven, No.5-1 sintering machine)FY2022 1H Moved upto the end of FY2021 1HRunning facilities in one series of upstream facilities(No.4 coke oven, part of No.3 continuous casting machine)FY2022 1HFeb. 2020 Movedup this timeKansai Works Wakayama AreaFeb. 2020Setouchi Works Kure AreaAll upstream facilities (including BF, sintering, steelmaking)The end of 1H FY2021Feb. 2020Setouchi Works Hirohata AreaMelting furnace ( New EAF)FY2023 1HMar. 2015Kyushu Works Yawata Area (Kokura)Upstream facilities (BF, sintering, steelmaking) Sep. 2020NewEast Nippon Works Kashima AreaSteel plate millFY2024 2HFeb. 2020Nagoya WorksSteel plate millThe end of FY2021NewEast Nippon Works Kimitsu AreaShape mill, No.1 continuous casting machineThe end of FY2021NewEast Nippon Works Kashima AreaLarge shape millThe end of FY2024NewKansai Works Wakayama Area (Kainan)Small-diameter seamless pipe mill (West)The end of FY2025NewEast Nippon Works Kimitsu AreaUO pipe lineThe end of FY2021May 2019East Nippon Works Kashima AreaUO pipe line Oct. 2019Mar. 2018East Nippon Works Kimitsu Area (Tokyo)Small-diameter seamless pipe mill May 2020Steel plateConstructionproductPipe &tube 2021 NIPPON STEEL CORPORATION All Rights Reserved.
Outline of production facility structural measures (2/2) 18Announce-mentSteelworksFacilities for shutdownApproximate time ofshutdown( : completed)NewEast Nippon Works Kimitsu AreaNo.1 hot-dip galvanizing line (No.1 CGL)The end of FY2024NewEast Nippon Works Kashima AreaNo.1 pickling lineThe end of FY2022 1HNewSetouchi Works Hanshin Area (Sakai)No.1 hot-dip galvanizing line (No.1 CGL)No.1 hot-dip galvanizing and aluminizing line(No.1 GAL)The end of FY2024The end of FY2022NewKansai Works Wakayama AreaAll steel sheet linesThe end of FY2024 1HNewSetouchi Works Hanshin Area (Osaka)All facilitiesThe end of FY2023 1H-- the end of FY2023Feb. 2020Setouchi Works Kure AreaHot strip mill, pickling lineThe end of FY2023 1HFeb. 2020Setouchi Works Hanshin Area (Sakai)Continuous annealing line, electro-galvanizingline, No.1 hot-dip aluminizing line (No.1 CAL)The end of FY2020Nov. 2019Setouchi Works Hirohata AreaTinplate millThe end of FY2020NewEast Nippon Works Naoetsu AreaSpecial stainless steel lineThe end of FY2021NewKansai Works Osaka AreaTitanium raw material plantThe end of FY2022 1HFeb. 2020Kansai Works Osaka AreaSpecial equipment for titanium round barmanufacturingThe end of FY2022Feb. 2020Kyushu Works Oita Area (Hikari Pipe & Tube)Titanium welded pipe production lineThe end of FY2021 1HNewNippon Steel Stainless Steel Kinuura WorksAll lines (the cold-rolling line and all other linesthereafter)The end of FY2021NewNippon Steel Stainless Steel Kashima WorksA part of annealing linesThe end of June 2021NewNippon Steel Stainless Steel Shunan AreaYamaguchi WorksA part of cold-rolling and annealing linesThe end of March 2021-- the end of June 20261 EAFThe end of FY2023Hot strip mill/ dedicated facility for production ofprecision products Sep. and Oct. 2020Steel sheetTitanium &specialstainlesssteelStainlesssteelFeb. 2020Nippon Steel Stainless Steel Kinuura Works 2021 NIPPON STEEL CORPORATION All Rights Reserved.
Change in major subject lines (Production facility structural measures)BFsContinuous castersSteel plate linesLarge shape linesSeamless pipe linesUO pipe linesHot strip linesCold rolling linesGalvanizing linesSpecial stainless steelrolling linesTitanium raw material lineTitanium round bar lineTitanium welded pipe lineNippon Steel Stainless Steelcold rolling linesNippon Steel Stainless SteelEAFsAlreadyannouncedAnnouncedthis time-4-1-1-3-1-2-1-1-1--19TotalBefore After--2-3-5-8-2-2-1-2-1-2-315 1032 244 24 23 22 07 617 1519 16--2-24 2--1-1--1---4-1-1-1-41 01 01 013 9--1-14 3-5-1- 2021 NIPPON STEEL CORPORATION All Rights Reserved.
Renewal and improvement of facilities, and higher-level20order mix –building a next generation hot strip millThe social needs forcarbon neutrality Further stricter world-wideregulation of fuel consumptionof internal combustion vehicles Needs for more lightweight bodiesfor EVs. (for mileage and battery weight）The social needsfor safety StrictercollisionsafetystandardsDemand for ultra-high-tensile strength steel sheets whichcontribute to more lightweight and stronger bodies ofvehicles and to easier processing is expected to increase.Ultra-high-tensilestrength steel sheetsThe high strength steel helps ensuresafety in the event of a vehicle crash,while reducing weight, improving fueleconomy, and reducing CO2 emissions.Its controlled crystal structure providesboth strength and workability.The ultra-high-tensile strength steelsheets have a tensile strength of 1.0GPa or higher.Build a next-generation hot strip mill to stablyproduce state-of-the-art ultra-high-tensile strengthsteel sheets at the Nagoya Works, which is our centerfor the manufacture of automobile steel sheetsProduction capacity: 6 MT/YStart of operation: 1Q FY2026 (plan)(After its operation at full capacity, the existing hot strip mill will be shut down.) 2021 NIPPON STEEL CORPORATION All Rights Reserved.
Higher-level order mix - Measures to improve thecapacity and quality of electrical steel sheetsSocial needs for carbon neutrality Increase in demand for vehiclemotor with higher performance*along with EV transition* Higher efficiency, smaller size, lighter weight, etc.Rapid growth in demand for highestzone NO electrical steel sheets World-wide stricterregulation forefficiency oftransformer21Social needs alongwith th
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