Sumitomo Titanium is the main supplier of titanium sponge to Kobe Steel. Kobe Steel has held equity in Sumitomo Titanium since 1953, which at that time was known as Osaka Titanium Co., Ltd.

Sumitomo Titanium is regarded as a world-class supplier of sponge titanium. Titanium sponge is currently made by seven companies in the world. In terms of quality and production there are only three steady suppliers in the world, two Japanese companies and one overseas company. However, should titanium demand go up in the future, the stable procurement of titanium sponge would become extremely important. For this reason, Kobe Steel decided to increase its equity in Sumitomo Titanium.

World titanium demand has been decreasing on the back of declining business from the commercial aircraft industry following the terrorist act on September 11, 2001 in the United States. In Japan, capital investment is stagnant. In the mid- to long-term future, demand is anticipated to return with recovery in the aerospace industry and new product applications.

Pioneering the titanium business, Kobe Steel is Japan”Ēs leading producer of titanium mill products. It is also the only domestic integrated producer of titanium mill products, with production ranging from ingot-making to mill product manufacturing. Under Kobe Steel's management policy of "selection and consolidation," the titanium business is one of the principle businesses of Kobe Steel and the company is working to further strengthen this area.

On November 14, 2002, Kobe Steel and Sumitomo Metal Industries entered into a cooperative agreement concerning their steel and titanium businesses. In the titanium business, Kobe Steel would supply Sumitomo with hot rolled titanium coil. The two companies would also cooperate in achieving mutual efficiency and cost reduction with regard to raw materials procurement, production and distribution in the titanium business. Kobe Steel's equity increase in Sumitomo Titanium is also a part of this collaborative relationship.

Background Information

Outline of Sumitomo Titanium Corporation

Established:	November 1952 (Previously known as Osaka Titanium Co., Ltd.)
Stock listing:	March 2002 (Second Section of the Tokyo Stock Exchange)
Capitalization:	6.58 billion yen
Employees:	398 (as of March 31, 2002)
Equity in Kobe Steel:	624,000 shares (equivalent to 0.02% in Kobe Steel)

Kobe Steel's titanium business

History:	Began research and development in 1949. First Japanese maker to commercialize titanium mill products.
Sales:	18.6 billion yen (fiscal 2001, ended March 2002)
Equipment:	Vacuum arc melting furnace, hot rolling mill and cold rolling mills (processing both steel and titanium), continuous annealing and pickling line, titanium welded tube equipment (Kobe Special Tube Co., Ltd.)
Products:	Titanium and titanium alloy mill products

1. Pioneer with over 50 years of experience in the titanium field. Plays a leading role in product development. (e.g. power plant condenser tubes, construction materials, golf club heads, and motorcycle mufflers)

2. Japan's only integrated producer of titanium mill products, covering ingot-making to the production of mill products.

3. Based on the vacuum arc remelting (VAR) process, the main melting technology in use today, Kobe Steel developed the "Kobe Process" which enables the recycling of titanium scrap.

4. Offers an extensive selection of titanium alloys to meet a broad range of user applications, from golf club heads to aircraft parts.

Examples of recently developed titanium alloys
Kobe Steel licensed Titanium Metals Corporation to manufacture and sell Kobe Steel”Ēs next-generation Ti-9 titanium alloy. The alloy has received ASTM Grade 35.

KS EL-F alloy balances high strength with the workability of pure titanium.

5. Qualified to supply the world's jet engine and aircraft makers.
(e.g. Rolls Royce engines, Airbus body)