2024 New Year's Message to Employees

On the occasion of the New Year, I would like to greet everyone who works in the JFE Group.

First of all, I would like to express my heartfelt sympathy to those affected by the Noto Peninsula Earthquake of 2024, which occurred on January 1 this year, and sincerely pray for a speedy recovery.

Last year, even as the turmoil of the COVID-19 pandemic subsided, geopolitical risks persisted around the world, including the protracted war in Ukraine and the destabilization of the Middle East. The global economic outlook was further clouded by sharp monetary tightening in response to global inflation and liability issues in China's real estate sector. Despite this challenging global landscape, JFE continued to make steady progress toward its FY2023 medium-term targets through the bold implementation of measures under its Seventh Medium-term Business Plan.

JFE Steel shut down upstream processes and hot-rolling facilities in its Keihin District last September, one of the final structural reforms prioritized in the medium-term plan. This will help reduce fixed costs and enhance the sales mix as JFE Steel continues to transition from quantity to quality. In addition, JFE Holdings unveiled its Ohgishima 2050 vision to repurpose certain bayside properties, also in the Keihin District south of Tokyo. The Ohgishima area has served as a hub for the global steel industry over the past century, but is now being targeted for new industries and job creation over the next 100 years as an initiative to contribute to the sustainable development of the surrounding area and all of Japan.

While coking coal prices have risen sharply since September in a stagnant market due to weak demand, especially overseas, JFE Steel expects to achieve year-on-year profit growth thanks to its structural reforms and efforts to improve sales prices, primarily in Japan. As part of its transition from quantity to quality, JFE Steel will expand electrical steel sheet production capacity in its Kurashiki District, and gradually bring this added capacity up to full strength in FY2024. In addition, the company has entered into an agreement with JSW India to jointly set up a manufacturing and sales company in India to capture the country's growing demand for grain-oriented electrical steel sheet.

Regarding carbon neutrality, JFE Steel is making the necessary capital investments to achieve its CO2 emission targets by FY2030. Last year the JFE Holdings raised over 200 billion yen through a public offering of new shares and the issuance of convertible bonds, which were well received by the market. JFE Steel hopes to install a large, high-efficiency electric-arc furnace in its Kurashiki District, with commissioning targeted at FY2027. In addition, JFE Steel began supplying JGreeX™ green steel products in the first half of FY2023. Using the mass balance approach to allocate cuts in manufacturing-process emissions to specific steel products, the JGreeX™ lineup achieves significantly lower CO2 emissions compared with conventional products. Several companies in the shipping and construction industries have already adopted these green products, and JFE Steel continues to develop newer and more advanced technologies for early implementation. In FY2023, for example, construction began in the Chiba District on facilities for testing a carbon-recycling blast furnace and other ultra-innovative technologies.

As for other major group companies, although JFE Engineering's earnings worsened in the previous fiscal year due to declining profits from overseas construction projects, in the current fiscal year the company has made steady progress toward its earnings targets by laying the groundwork in key areas identified in the medium-term plan. For example, the Nyuzen Offshore Wind Power Farm is now operational and the construction of a waste-to-energy plant in Bac Ninh Province, Vietnam is progressing smoothly.

JFE Shoji, which posted a record profit in FY2022, expects to exceed its targets for the current fiscal year despite a global slump in steel prices, particularly in the United States. The company is steadily expanding its earnings base in Japan and overseas by strengthening its supply chains in the electrical steel sheet and automotive businesses and making investments focused on construction-materials business in overseas markets.