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News Release

JFE Holdings, Inc.

2013 New Year’s Message to Employees
Hajime Bada, President and CEO, JFE Holdings, Inc.

Hajime Bada

Hajime Bada
President and CEO

Happy New Year and greetings at the start of 2013!

As you know, uncertainty over the global economic outlook rose sharply last year. Economic activity slowed in Europe, which had been facing both a debt crisis and a slumping financial sector, and in the BRICs, which had been enjoying strong economic growth. Japan, meanwhile, showed no sign of breaking away from its deflationary spiral. Domestic manufacturers shifted operations abroad due to structural difficulties including the strong yen.

Given the unlikelihood of the business environment recovering anytime soon, it is necessary for us to deal with current conditions with the idea that the economic climate will remain gloomy for the near term.

Key Initiatives in 2013

In our fourth medium-term business plan, we decided to focus on improving profitability in existing businesses and expanding our operations in growing markets.

However, the business environment has become more severe than expected when we drew up the plan, due to factors such as the expanding demand-supply gaps in global market and the ongoing technical catch-ups in emerging countries. In addition, the JFE Group drew harsh assessments by stock markets and credit ratings agencies.

Under such circumstances, I would like to ask everyone to give the top priority to the improvement of profitability in our existing businesses. Without this, we would not be able to expand our businesses in growing markets nor improve our financial standing.

Key Challenges in the Group

There are five key challenges that the JFE Group must address this year.

The first is an improvement of profitability in domestic bases. In the immediate future, our most critical task is to maintain a certain level of earnings even under current economic conditions. This means we must enhance our cost and quality competitiveness, as well as optimize our supply chains and improve customer service.

The next is a continued contribution to society by developing and commercializing the world’s most innovative technology in accordance with our corporate vision. It is important to generate effective results by developing new products that immediately satisfy customer needs and process technologies that improve our own cost competitiveness.

Thirdly, we must secure our financial strength. Limited corporate resources must be allocated with maximum efficiency by prioritizing investments and ensuring returns on each investment.

The fourth is to develop growth initiatives. Business strengths in growing markets such as Southeast Asia must be leveraged by expanding our production and sales bases, developing strategic collaboration with new partners and satisfying local demands, thereby expanding business in our fields of specialty.

Our final challenge is to secure and nurture human resources crucial to our global expansion. We need to rejuvenate such resources through enhanced training and recruitment of diversity, ultimately to establish a culture of creativity and initiative.

My Expectations

This is the most challenging environment we have faced since our Group was founded. All operating companies need to improve their profitability with indomitable resolve. It is necessary to recognize that this year is a crucially important year for our Group, and that all members must implement all possible measures without regard for past precedence.

We turned JFE Shoji Trade into a wholly owned subsidiary to improve our overall competitiveness by bringing in their upstream and downstream supply chain capabilities. All operating companies, including JFE Shoji, must pursue intensive information sharing and proactively collaborate in their respective areas of specialty to help realize the benefits of JFE Shoji’s restructure.

Key Challenges for Each Company

So, what are the specific challenges that each group company must address?

For JFE Steel, it is enhanced profitability for its steel works operations. A total effort is required to improve performance in terms of cost, quality and sales based on objective and quantitative benchmarking. The company also needs to accelerate its response to the market, including through the horizontal adoption of best practices by all taskforces and product sectors. In addition, returns on existing investments must be assured.

For JFE Engineering, the challenge is to increase earnings by expanding its fields of specialty, including environmental industries engineering and energy industries engineering, and business in overseas markets. I also want the company to focus on meeting customer needs and utilizing new technologies to develop products that could become new pillars of business.

JFE Shoji must focus on acquiring new customers and expanding its sales volume at home and abroad in cooperation with JFE Steel. Supply chains must evolve through the expansion of processing centers in growing markets and improved performance at existing bases. Also, as the Group’s core trading firm, I would like to see JFE Shoji proactively coordinate its business strategies with companies throughout the Group.

Japan Marine United Corporation, established through the merger between Universal Shipbuilding Corporation and IHI Marine United Inc., needs to secure orders and improve earnings. To do this, it must harness the full benefits of its integration, including cost reductions, strengthened design and engineering capabilities, and evolved energy-saving technologies, regardless of the harsh business environment.

In closing

The thorough implementation of our social responsibilities is fundamental. Please fulfill our responsibilities to earn the increased trust of our stakeholders, including shareholders, employees, customers and communities.

These are my thoughts in the dawn of our new year. Very best wishes to you and your family for a prosperous 2013!