Fiscal 1998 was extremely harsh for the Iron and Steel Sector.
Domestic steel demand was weak throughout the year owing to sluggishness
in such principal industries as the automobile and construction
industries. On the other hand, brisk exports to the United States and
Europe in the first half of the fiscal year reflected robust economic
conditions in those markets.
However, exports to the United States
plunged during the second half of the term because of antidumping charges.
Under these conditions, total sales of steel declined from the previous
fiscal year.
Sales of steel castings and forgings retreated sharply in the wake of
slumping domestic demand and the economic turmoil in Southeast Asia and
Korea. Sales of marine crankshafts, a principal product, registered a
particularly steep decline.
The environment for our titanium products was severe because of
plummeting domestic demand from markets for chemicals, electrolysis, and
such consumer products as golf clubs.
Despite a slump in demand from the domestic automobile industry, we
recorded higher overall sales of steel powders thanks to stepped-up
marketing efforts.
In welding consumables, we recorded favorable sales of flux-cored wire
for shipbuilding. However, total sales of welding consumables declined
owing to a slump in domestic demand and dullness in Southeast Asia and
China.
Sales of electronic materials, polymers, and composites were sluggish,
partially because of intensifying price competition. On the other hand,
sales of medical materials expanded steadily.
As a result, Iron and Steel Sector sales declined 12.6%, to 525.4
billion yen.
Regarding principal R&D activities in fiscal 1998, we developed
coastal weathering steels with high resistance to salt damage. In steel
sheet, we developed and commercialized our environment-friendly Green Coat
and ECOSTEEL. In welding consumables, we launched the DW Stainless Series
of low-fume, low-sputter flux-cored wires for stainless steel, MX-Z210
flux-cored wire for color coated steel sheets, DW-1SZ flux-cored wire for
galvanized steel sheet, and Aluminum Arrow Pack wire for large-volume
aluminum welding.
In October 1998, we consolidated our high-functional materials and
filters business in Shinko Acteq Co., Ltd., a subsidiary specializing in
carbon and ceramic materials.
Turning to capital investment, during the year under review we
emphasized making strategic capital investments with the aim of
strengthening our competitiveness. We completed renovations of the No. 7
wire rod mill at Kobe Works in January 1999 and the No. 8 wire rod mill at
Kakogawa Works in May 1999. In addition, we completed a heat treatment
leveler for steel plates and continued construction of a sizing press for
hot-rolled strip at Kakogawa. We also steadily progressed with projects
aimed at raising product quality and lowering costs and completed a
facility for hot metal pretreatment of all molten iron at Kakogawa Works.
In the electric power generation business, we completed all of the
environmental assessment procedures and obtained all of the necessary
approvals to construct coal-fired power plants at Kobe Works. Construction
of the plants, which will have a total capacity of 1.4 GW, commenced in
March 1999. In carrying out this project, Kobe Steel plans to use the most
advanced protection equipment available, concentrating on energy
conservation and accident prevention functions as we strive to build clean
and safe urban-type electric power generation facilities. At the same
time, we are endeavoring to further strengthen our profit base by making
optimum use of our infrastructure and know-how. In a related development,
Kobe Steel began supplying The Kansai Electric Power Co., Inc. with
58,000kW of electricity produced at Kakogawa Works from waste heat derived
from coke dry quenching. We began supplying this electric power from April
1, 1999.
Overseas, Kobe Steel and USX Corporation concluded an agreement with
the Blackstone Group and Veritas Group to combine the steelmaking and bar
producing assets of USS/KOBE Steel Company with Republic Engineered
Steels, Inc., and Bar Technologies, Inc. Another U.S. joint venture with
USX, PRO-TEC Coating Company, began operating a second hot-dip galvanizing
line in autumn 1998, thereby raising its annual production capacity to one
million short tons of galvanized steel sheet. In terms of production
volume and product quality, this joint venture has become representative
in the U.S. industry for hot-dip galvanized steel sheet. Kobelco Metal
Powder of America, Inc., a steel powder subsidiary in the United States,
increased production to meet strong demand. Kobe CH Wire (Thailand) Co.,
Ltd., steadily increased production of high-quality steel wire. Despite
the difficult operating environment in Asia, our welding subsidiaries and
affiliates in Thailand and Korea recorded favorable business results.
In fiscal 1999, domestic demand for steel is expected to grow slightly.
Demand from manufacturing industries is expected to remain weak but the
construction industry should improve somewhat to sustain overall demand to
about this year's level. Overseas, although exports to the United States
are likely to drop sharply due to antidumping charges, overall exports are
expected to increase because demand in Asia is improving and the market
for hot-rolled coils is tightening. In welding consumables, difficult
conditions are likely to persist because of soft domestic demand. Against
this background, we will continue to make efforts to maximize sales
volume; maintain or improve product prices; steadily proceed with
rationalization and cost-reduction measures; aim for the rapid realization
of our investment objectives; carry out efficient results-oriented
R&D; and expand and strengthen the foundation of our overseas
production bases. By carrying out these measures, we aim to further
bolster our competitiveness. |
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