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1. Ensuring all aspects of manufacturing take the environment into account (1)

Global Warming Countermeasures

Global warming is affected by the increase in greenhouse gases, including CO2 and CFC substitutes. The Kyoto Protocol came into effect in 2005 and global warming countermeasures are being advanced worldwide. In Japan, legislation has been passed to promote global warming countermeasures, and various measures are being implemented. In business circles, voluntary action plans have been formulated to promote global warming countermeasures, and action is being taken in all business sectors. The Kobe Steel Group is promoting energy-saving and more rationalized use of energy through wide-ranging activities based on the voluntary action plan for each business sector.

Energy-Saving in Production Processes The Kobe Steel Group overall consumed 226 PJ (petajoules) of energy in fiscal 2007. Of this, 93.5% was used in iron- and steel-related operations. The use of energy has been greatly rationalized at steel works and other manufacturing plants through more rigorous combustion control, the concatenation of equipment, the installation of waste heat recovery equipment, and other state-of-the-art energy-saving technologies. As a result, the energy efficiency of our production processes is now among the highest worldwide. For the future we are promoting the development of new production technologies that are more energy-efficient and have less impact on the environment. Energy Use by Segment (including Group companies) Total energy use in 2007: 226 PJ Iron and Steel Sector After the 1970s oil shocks, energy use was made more efficient at the Kakogawa and Kobe Works by implementing concatenated processes, recovering waste heat and introducing other energy-saving technologies. Between 1970 and 1990, we achieved energy-savings of more than 20%. Since the 1990s waste heat recovery facilities have been expanded and other facilities made more energy-efficient, and since 2000 we have attained very high levels of energy-saving by making effective use of wastes, such as utilizing plastic waste in blast furnaces and wastes such as RPF (recycled plastic fuels) in power generator boilers; upgrading the energy-efficiency of facilities; and installing other state-of-the-art energy-saving technologies. We are also contributing to energy-saving in other business fields by developing and supplying environment-friendly products, such as high strength steel sheet that lightens vehicle weight in the automotive industry. History of Energy-Saving Activities Production Flows and Main Energy-saving Activities In fiscal 2007, lowering the proportion of reductant in blast furnaces and other energy-saving measures in production processes at the Kakogawa and Kobe Works led to a reduction in specific energy consumption of 18.1% per unit ton of product compared with 1990, and specific CO2 emissions were reduced 18.5%. But increases in demand for the automotive, shipbuilding, and other industries led to 3.1% growth in the production of crude steel from fiscal 2006. As a result, CO2 emissions increased 4% over the previous year, a 0.1% increase over fiscal 1990. From fiscal 2008 onwards we will continue operational improvements such as lowering the proportion of reductant in blast furnaces, and work to save energy wherever possible. We are investing in energy-saving projects, installing high-efficiency gas turbine power generating facilities at the Kakogawa Works, and upgrading the efficiency of the turbines for power generation at the Kobe Works, to reduce energy consumption and cut CO2 emissions. If the current high production levels continue, it will be difficult to meet targets with energy-saving measures alone, but we are studying how Kyoto mechanisms can be utilized to ensure that we meet our reduction targets. Trends in energy consumption and specific energy consumption (Iron and Steel Sector; approximate figures) Trends in CO2 emissions and specific CO2 emissions index (Iron and Steel Sector; approximate figures) Notes: Aggregate figures for the Iron and Steel Sector, including coke production. Based on 'Comprehensive Energy Statistics, Table of Standard Generated Heat Volumes' (Resources and Energy Agency); documents of Calculation Method Study Group for Greenhouse Gas Emissions (Ministry of the Environment) Aluminum and Copper Company The Aluminum and Copper Company has been working to save energy in line with voluntary action plans formulated by the Japan Aluminium Association and Japan Copper and Brass Association. At our three manufacturing bases, the Moka Plant, Chofu Works and Daian Plant, we have been switching from coal and oil-fuels that release large quantities of CO2-to natural gas, which releases less CO2, and we will continue our efforts in waste heat recovery. As a result of these measures, CO2 emissions were reduced by about 4% over the previous year for the Aluminum and Copper Company as a whole, despite an increase in overall production of 2.4%. We will promote further energy saving in fiscal 2008. Trends in specific energy consumption and CO2 emissions (approx.) Voluntary action plans Business Associations' Voluntary Action Plans (April 2008) Business (Industrial Association) Targets Steel (Japan Iron and Steel Federation) To reduce energy consumption in production processes to a figure 10% lower than 1990 figure by 2010. Also, assuming a collection system is in place, to utilize waste plastic in blast furnaces thereby reducing energy consumption by a further 1.5% of the 1990 figure. Aluminum (Japan Aluminum Association) To reduce specific energy consumption by 11% of 1995 figure by 2010. Copper and brass (Japan Copper and Brass Association) To reduce specific energy consumption in manufacturing by 9.05% of 1995 figure by 2010. Industrial machinery (Japan Society of Industrial Machinery Manufacturers) To reduce emissions of CO2 by 12.2% of 1997 figure by 2010. (CO2 emission coefficient for purchased electricity based on 1997 coefficient) Group Companies' Activities At Group companies, plant production processes are being improved and facilities upgraded to make more efficient use of energy. Examples of Activities Group company Location of plant Activities Shinko Kobe Power Inc. Kobe, Hyogo Prefecture 140 kWh of electricity from solar power generation used for interior lighting, etc. Shinko Aluminum Wire Co., Ltd. Sakai, Osaka Prefecture Production lines combined to cut energy consumption. Shinko Care Life Co., Ltd. Kobe, Hyogo Prefecture Outdoor lighting of public space at retirement home powered by wind-generated electricity. PRO-TEC Coating Company Ohio, USA An induction heater added to existing annealing furnace to boost thermal efficiency. Kobe Aluminum Automotive Products, LLC Kentucky, USA Regeneration burners installed in new melting furnace. Singapore Kobe Pte. Ltd Singapore Control system for multi-stage annealing furnace upgraded to save energy. Kobelco EDTI Compressors Inc. California, USA Energy-saving hoses and sprays used in paint booths etc., to reduce pressure loss. COMSIGUA Venezuela Natural gas used for heating and pre-heating to improve thermal efficiency.

Energy Savings in Logistics

Kobe Steel aims for the most appropriate, rapid transport of raw materials in Japan and around the world, and within plants and works, as well as for delivery of products to customers. Efficiency is being increased in logistics through greater coordination between sectors, and modal shifts-switching to means of transport requiring lower energy consumption per volume of cargo transported.

Some of Japan's largest unloaders in operation at the Shinko Kobe Power Station

	Changes in Distribution Efficiency Activities

	Iron and Steel Sector

Efforts have been made to improve the efficient transportation of products by selecting the optimal routes and means of transport and by upgrading information systems such as the shipping allocation system. Modal shifts in means of transport from truck to ship or rail have been pursued since 2003. Coordination with Nippon Steel and Sumitomo Metal Industries has resulted in joint operations in domestic waters and fewer journeys made by empty vessels. Measures are now being taken to boost load efficiency by combined loads in cases where one company alone cannot fill a vessel bound for a distant location. Similar efforts are being directed toward increasing efficiency of shipping operations between logistics companies in the Group. As a result of these measures, in fiscal 2007 98% of transportation of 500 km or more was by ship or rail. To maximize the benefits of the specialized large iron ore carrier Shinko Maru, that came into service between the Kakogawa and Kobe Works in March 2007, measures to increase efficiency in its operation are continuing, including improved loading and unloading. It remains an important policy for Kobe Steel to increase efficiency of operations still further in all means of transport. For transport by ship, measures include installation of improved infrastructure for loading and unloading. For land transport, efficiency of truck transportation is to be further improved.

Loading wire rod into a container The Shinko Maru

	Welding Company

The Welding Company is pursuing joint shipping with other Group companies for the transportation of its products. We are also promoting modal shifts. For example goods from the Saijo Plant in Hiroshima bound for distant Chiba are now dispatched by rail instead of truck.

	Aluminum and Copper Company

Together with joint shipping with other companies in the same business, the Aluminum and Copper Company is promoting modal shifts. Some of the truck transportation of goods from the Chofu Works in Shimonoseki to the Chubu and Kansai regions has been switched to ferry. Containers are being increased in size, and we are also improving management of transportation, and sharing information with freight companies. Some goods from the Moka Plant bound for Kyushu or Osaka have been switched from truck to JR open container rail transport. Joint application was made with the related transport companies for recognition of this as a 'Green Freight Transport Partner Project', a NEDO ancillary project aiming to reduce CO2 emissions in the distribution sector, and approval was obtained. Also, loading rates are being raised through mixed loading and using larger freight cars. At the Daian Plant mixed load transportation in mainly 10-ton freight cars has increased 5-10%.

	Machinery and Engineering Company

At the Harima Plant, simplified packaging with reinforced cardboard is used for transportation of compressors to cut packaging costs. Using recyclable reinforced cardboard instead of the former wooden skids reduces environmental burden as well as costs. To boost loading efficiency and reduce transportation costs we are promoting the mixed loading of goods for shipment and distribution, as well as chartered services.

	Group Companies' Activities

Group companies are also undertaking efforts to improve transport efficiency.

	Examples of Activities

Company name Location of plant Activities to increase transport efficiency Shinko Kenzai, Ltd. Amagasaki, Hyogo Prefecture Efficiency increased by reducing urgent shipments and separate transportation through better management of delivery schedules. Shinko Wire Company, Ltd. Kakogawa, Hyogo Prefecture Longer distance transportation switched from truck to JR freight or ship. Increased delivery vehicle size and increased loading rates through active use of outside warehousing facilities. Kobelco & Material Copper Tube, Ltd. Hadano, Kanagawa Prefecture Through improved loading rates, more direct shipments, unloading at multiple destinations and much greater use of scheduled services, 756 fewer trucks a year were despatched and CO2 emissions were cut by 200 metric tons per year. Kobelco Construction Machinery Co., Ltd. Hiroshima City Energy saved in transportation by switching ports for shipping overseas and boosting use of coastal shipping for transportation to Hokkaido and Tohoku.