Note: These figures include inter-segment sales.
Aluminum is increasingly being used by automobile manufacturers amid growing concern and awareness about environmental and recycling problems. There are high hopes for the development of an aluminum vehicle.
Cutting edge production technologies and a renowned quality assurance system combine to ensure that our heat exchanger tubes provide unparalleled performance.	Glass substrates for hard disks are growing in popularity because they can store more data than aluminum substrates.

Demand for rolled aluminum and copper products was sluggish, reflecting slack demand for aluminum can stock for beverage containers due to unseasonable summer weather as well as weak demand for copper sheet for electronic applications and copper tubes for air conditioners. Under these challenging conditions, Kobe Steel posted lower sales volumes of rolled aluminum and copper products, as sales of such mainstay products as aluminum can stock, copper sheet for electronic applications, and copper tubes for air conditioners declined. Overseas, our Southeast Asian subsidiaries recorded lower sales volumes of copper tubes for air conditioners owing to the adverse influence of the economic slowdown in that region. These factors, coupled with the effects of declines in aluminum ingot and copper cathode prices, led to a 14.5% decline in total sales in the Aluminum and Copper Sector, to 286.0 billion yen. Regarding R&D, we focused on the development of products in fields that are expected to grow in the future as well as on products that can create new markets. For example, we began marketing precoated aluminum sheet for use in electronic and electric devices that features excellent lubrication properties and conductivity. In automobile-related markets, which are expected to post significant growth along with the implementation of safety and environmental measures, we have developed aluminum sheets with outstanding formability and corrosion resistance for use as automobile body panels. Kobe Steel is also expanding the use of extruded aluminum door beams to the full range of automobiles. In addition, we are developing low-cost, extruded frame materials that will offer superior weldability and shock-absorbing properties. With the introduction of new strength evaluation equipment, we can reliably design and evaluate aluminum cast and forged products for automobiles. In copper sheet, we developed and launched low-cost terminal materials that have outstanding heat-resistant properties. We have progressed with the development of new aluminum fabricated products, particularly with regard to sound absorbing materials for use on the sides of excavated roads. In environment-related activities, the arc furnace that we jointly developed with The Tokyo Electric Power Co., Inc., improves the recovery ratio for aluminum from the dross produced during smelting, enabling dross previously handled as industrial waste to be effectively recycled as a resource. Also, we progressed with the development of a new smelting agent used to help protect the environment during the aluminum smelting process. We are also participating in a national project for the development of aluminum recycling technologies. In this project, we are developing technologies for removing inclusions from aluminum during the recycling process and technologies for decomposing dioxin. As exemplified by these activities, in our role as a leading company, we are progressing with aluminum recycling activities and responding to environmental problems as we focus on developing technologies that contribute to society. Regarding capital investment in fiscal 1998, we strengthened and increased the production capacity of Kobe Precision, Inc., in the United States, for reclaimed test silicon wafers used in semiconductor manufacturing. Also during the year, together with Nippon Sheet Glass Co., Ltd., we established Advanced Disk Technology Sdn. Bhd. for the processing and sale of glass substrates for hard disks. Preparations are underway for the start-up of operations. With demand for glass substrates expected to grow, we aim to aggressively expand this business. Overseas, our operations are now fully underway and progressing smoothly at KAAL Australia Pty. Ltd., a joint venture with Alcoa Inc. to produce can stock in Australia. We manufacture and market aluminum computer disk substrates in the world's three largest PC production locations: Kobe Steel in Japan, Kobe Precision, Inc., in the United States, and Kobe Precision Technology Sdn. Bhd., in Malaysia. Buoyed by firm demand for PCs, overall production at these bases remains at a high level. We also operate three bases for the manufacturing and marketing of copper tubes for air conditioners in three major consumer markets. These bases are Kobe Steel in Japan, Kobe Copper Products, Inc., in the United States, and Kobe Copper (Malaysia) Sdn. Bhd., in Malaysia. By strengthening ties with our overseas production bases, we are building a supply structure that responds quickly to changes in demand in each region. In the coming fiscal year, we anticipate a rise in domestic demand for aluminum used for lightweighting products and copper products for electronic applications. The outlook for aluminum automotive products is promising. Automobile manufacturers are increasingly using aluminum amid growing consideration of environmental and recycling problems, and there are high hopes for the start-up of mass production of aluminum vehicles in the near future. While responding to this demand, we will strive to create new markets by drawing on our technology development capabilities. We also plan to strengthen our overall international competitiveness, focusing on such areas as cost, product quality, and customer service, as we work to maintain our position as one of Japan's leading producers of aluminum and copper.