The Japanese market shrank substantially as a result of a persistently stagnant economy and cutbacks in public works projects due to fiscal restraints. In Southeast Asia, strategically our most important market, selected projects were suspended or postponed as the region fell into economic confusion following the Thai monetary crisis. The business environment deteriorated greatly, which, at the same time, stimulated intensified competition.

Accordingly, net sales of ¥383.8 billion and new orders worth ¥346.6 billion were both down from the previous year.

Although the Japanese Cabinet has agreed on a supplementary budget of ¥16 trillion in fiscal 1998, it is not likely to kick-start a full economic recovery in Japan, and Southeast Asia's economic prospects will remain unpromising. The business environment is expected to remain severe.

The Engineering Division, in cooperation with NKK group companies, will redouble efforts to strengthen sales capabilities and cost competitiveness. The goal will be to stabilize earnings with sufficient sales and new orders, in spite of the difficult conditions foreseen.

LNG tanks and LNG carrier

nergy Engineering

The demand for natural gas as clean energy for municipalities and electrical power generation will continue to rise steadily, prompted by growing concern for the global environment.

In Japan, where most natural gas is imported as liquefied natural gas (LNG), NKK constructed two giant in-ground LNG tanks at the Negishi terminal of Tokyo Gas Co., Ltd. The design features the Technigaz stainless steel membrane, which absorbs the contraction of LNG at cryogenic temperatures. These 200,000-kiloliter tanks are the world's largest LNG storage facilities of this type.

NKK is a leader in the engineering and construction of pipelines, which are the most economical and stable means of transporting oil and gas. We completed a pipeline between the port of Melaka and Kuala Lumpur's new international airport in Malaysia. The Multi-Product Pipeline supplies a variety of oil products, from diesel to Jet A-1, using the highly advanced supervisory-control and data-acquisition (SCADA) system.

In response to deregulation in Japan and brisk demand for electrical power in East Asia, we are aggressively constructing diesel-engine power-generation plants, and circulating fluidized bed (CFB) and waste-heat recovery boilers for independent power producers, as well as industrial power generation plants. We will continue to promote environmentally friendly power plants by developing co-generation systems featuring enhanced energy efficiency and recycling of industrial wastes, such as wood chips, discarded tires and refuse-derived fuels.

Multi-product pipeline in Malaysia

30,000kW CFB boiler power plant for Nihon Cement's Tosa Plant

nvironmental Engineering

In the field of waste disposal plants, we completed construction of 24-hour incineration plants for the cities of Ichinomiya, Ageo, Hachioji and Morioka. Hachioji's Tobuki Plant has three 100-ton/day 24-hour stoker incinerators and two 18-ton/day ash melting furnaces, the latter incorporating an innovative electric-resistance ash-melting and slag-recovery process that has attracted considerable attention.

We strengthened our image as an environmentally concerned company with public visitation programs at the NKK Environment R&D Center, which opened in 1996, and the Keihin Works, where visitors were able to view a waste plastics recycling and blowing system for blast furnaces. Municipalities and private companies, impressed by our leadership in the development of environmentally responsive plants that incorporate resource recovery and industrial waste recycling, are increasingly coming to us for consultation on environmental measures.

We led the market for water treatment systems by winning orders for four dry activated-carbon-powder injection systems. We also ranked first in orders for night soil treatment facilities employing membrane filtration systems, giving us a secure foothold in this new field.

Success in developing environmental plants depends on the quality of recycling, resource recovery and anti-dioxin designs. Staying competitive in the water treatment field, meanwhile, hinges on the quality of anti-earthquake, sludge-treatment and recycling designs, as well as the quality of the purified water. Working in close cooperation with our group companies, we will increasingly address these needs to win more orders.

Overseas, we continued to develop business and provide environmental engineering solutions customized to each client.

The Tobuki plant, featuring three 100-ton per day incinerators and two ash melting furnaces

Sludge ash melting plant

ron and Steel Engineering

In response to the economic crisis in Southeast Asia, normally our primary market for electric arc furnaces and rolling mills for bars and rods, we concentrated on developing other markets. As a result, we won an order for a large-scale electric arc furnace in Egypt.

We also began selling our new direct iron-ore smelting reduction (DIOS) process. In response to a worldwide shortage of iron resources, numerous ironmaking processes have been newly developed to replace blast furnaces. We have received numerous inquiries from around the world concerning our DIOS process, a superior technology that is drawing the greatest attention among these new processes.

In the chemical field, we received an order for an ammonium nitrate plant in Indonesia. We are targeting increased orders for nitric acid and ammonium nitrate plants, while also working to expand the market for our flue-gas desulfurization equipment.

World's first continuous rolling mill supplied by NKK to Tokyo Steel Manufacturing Co., Ltd.

TCRSS cold rolling mill constructed with assistance from the Iron and Steel Engineering Division

teel Structures, Machinery and Construction

NKK received a succession of orders for bridges to establish a solid position in the market. We played a vital role in constructing the Akashi Kaikyo Bridge, which was completed during the year with much fanfare. The world's longest suspension bridge, measuring 3,911.1 meters in total length with a 1,990.8-meter center span, suffered no damage whatsoever during the Great Hanshin and Awaji Earthquake of 1995, when it was still under construction. We are also expanding our role in bridge-building markets outside of Japan.

Our hybrid steel and concrete caisson, highly praised as technically superior to conventional reinforced concrete caissons in soft ground installations, continued to be widely employed for shore protection projects throughout Japan. We also received many orders for structural steel frames for buildings in both Japan and East Asia, as well as orders for dam and river water gates.

We expanded our lineup of machinery systems to include automobile parking systems, logistics systems, shield tunneling machines and cranes. Marketing and sales activities in the domestic market were enhanced to strengthen our position.

The Akashi Kaikyo Bridge, the world's longest suspension bridge, opened April 1998

Silo plant constructed by NKK for Tomen Corporation

hipbuilding and Offshore Structures

Steady performance in both new shipbuilding and ship repairs enabled the Shipbuilding and Offshore Structures Division to mark its first recurring profit in three years.

Our standardized MX series of ships continued to draw high praise, resulting in substantial orders for Cape-size bulk carriers, Aframax tankers and Suezmax tankers.

We received an order for our fourth LNG carrier, featuring a storage capacity of 22,500 cubic meters, to maintain the top share of the domestic market for small and medium-sized LNG carriers and extend our strong reputation in this field both at home and abroad.

ew Business

We entered a number of new fields during the year by exploiting our comprehensive range of engineering capabilities. One such field was the wind power plant field, where we captured a leading domestic market share. In the field of leisure facilities we incorporated our snow, ice and water technology in indoor parks for skiing and water sports. We also participated actively in development of the Megafloat structure for offshore airports of the future.

A fishery research ship built by NKK for the Fisheries Agency of Japan

Wind power plant