The second hot-dip galvanizing line under construction at PRO-TEC Coating is scheduled to commence operations by the end of 1998.

To promote the use of steel in residential construction we constructed a finished model house and a "frame" house at our research facilities.

Flux-cored wire for stainless steel is used to weld such structures as watergates, chemical transport ships, and beer storage containers. Our DW Stainless series of flux-cored wires enables users to perform all types of welding, thus contributing to significant cost reductions.

Our K-MAX SS HIP system is a surgical hip-joint implant made of a titanium alloy with superior strength and functions than other medical-use titanium alloys.

Note: These figures include inter-segment sales.

Domestic demand for iron and steel began recovering in the second half of the fiscal year, owing to demand from the automobile, shipbuilding, and construction industries. On the other hand, exports showed an overall decline as shipments to China and Southeast Asia fell. Amid this environment, we recorded higher sales by carrying out aggressive marketing activities and stepping up efforts to expand sales.
We posted an increase in sales of castings and forgings thanks to energetic efforts to secure new orders for crankshafts amid robust demand,particularly in the shipbuilding industry.
As a leading producer of titanium products, we posted sharp growth in sales by expanding orders in the aircraft and electric power industries and in export markets, where demand was brisk, and by increasing sales in new fields, including consumer products.
In steel powders, although we faced a severe operating environment because of the continued shift to overseas production by domestic users, vigorous marketing efforts yielded an increase in sales.
We also strove to maximize the sales volume of welding materials by concentrating on a campaign to expand sales of flux-cored wire inthefavorable domestic market and by reevaluating ouroverseas marketing strategy. As a result, sales of welding materials increased over the previous year.
In addition, we continued to expand sales of our medical materials, including artificial hip joints that were developed using our titanium alloy technologies, and thin, high-strength fiber reinforced plastics for notebook PCs.
As a result of the previous developments, sales in the Iron and Steel Sector rose 7.3%. We developed a boron steel rod that does not require heat treatment for processing into bolts. We also developed and commercialized a fingerprint-resistant thin steel sheet for use in household electronicappliances. In titanium products, we developed a high-formability, high-strength titanium for watches that is fashionable and bio-compatible. We also developed a titanium sheet with anti-bacillus properties that has applications as a construction material in hospitals, food processing plants, restaurants, and other places where hygiene is important.
In welding materials, we worked to develop and cultivate markets for high-functional filters while expanding sales of our honeycombed deodorizing materials for refrigerators and washrooms.
During the fiscal year, we made capital investments to raise the quality of our products, rationalize operations, and lower costs. Concurrently, with the aim of strengthening our future iron and steel operations, we made planned strategic investments, including those for renovating our wire rod mills. Among principal facilities coming on stream in fiscal 1996, a pulverized-coal injection facility at the No. 3 blast furnace at our Kakogawa Works began operation in August. As a result, all of Kobe Steel's blast furnaces are capable of using more than 200kg of pulverized coal per ton of hot metal. Also at Kakogawa Works, to reduce electricity costs we began operating a 145,000kW electric power generating facility.
Overseas, USS/KOBE Steel Company, a joint venture in the United States with USX Corp., has modernized its facilities with the installation of a pulverized-coal injection facility, a continuous bloom caster, a small bar mill, and vacuum degassing facilities. That joint venture is responding to needs for high-grade steel, primarily in the automobile industry, by entering the market for steel wire rod.
Another U.S. joint venture with USX, PRO-TEC Coating Company, is supplying interior and exterior automobile panels to Japanese transplants as well as to U.S. automakers and is earning widespread acclaim. In both 1995 and 1996, this joint venture achieved the world's highest annual production volume for a single hot-dip galvanizing line, and is continuing to record profits. In addition, this company has decided to construct a second hot-dip galvanizing line with an annual production capacity of 400,000 short tons. Plans call for the new line to commence operations by the end of 1998.
Amid rising demand for steel powder because of favorable conditions in the U.S. automotive industry, Kobelco Metal Powder of America, Inc., posted steady growth in sales thanks in part to an increase in production at a second reduction furnace that was installed in fiscal 1995.
In our welding operations, Kobe Welding of Korea Co., Ltd., and Kobelco Welding of Europe B.V., both established in fiscal 1995, continued to make steady progress. Both companies are expected to show favorable growth in the near future.
In a new development, we concluded a contract in January 1997 to supply electricity to The Kansai Electric Power Co. Inc. Under the agreement, we will construct a 700,000kW coal-fired power plant at Kobe Works and use recycled heat from coke dry quenching equipment to be installed at Kakogawa Works to generate another 58,000kW. The power plants will be constructed in harmony with the surrounding region, giving top priority to environmental protection and safety. With this project, we are stepping up efforts to contribute to the reconstruction of the local economy and the development of the local community in addition to strengthening our profit base. We have also submitted a bid in response to Kansai Electric Power's call for another tender in August 1997. We are considering constructing a second 700,000kW power plant at Kobe Works for this project.
On another front, to expand the use of steel in new fields, we launched a steel-frame house business development project in fiscal 1996 to promote the potential of steel in residential construction in Japan. Following the construction of a "frame" house and a model house, we successfully applied to the Ministry of Construction for qualification of our structural system.
In fiscal 1997, demand for iron and steel is expected to be strong. Similarly, robust demand is likely for castings and forgings as well as titanium. We will continue to make efforts to maximize sales volume; maintain or improve product prices; progress with rationalization and cost-reduction measures; make efficient capital investments and progress with R&D; and expand and strengthen the management foundation of our overseas production bases. Through these measures, we are aiming to further bolster our competitiveness.