Demand for steel remained very strong in fiscal 2007 as the growth of emerging
economies, mainly in the BRIC nations, offset soft demand in some sectors of the U.S.
steel market. Additionally, the supply–demand balance remained stable. One major
reason was measures by the Chinese government to hold down steel exports, which
had been climbing rapidly in recent years along with China’s higher production
capacity.
In Japan, there was a downturn in construction activity because of the enactment
of stricter building standards. However, healthy external demand kept orders for
steel consistently high, particularly for medium-high grade steel used by manufacturers
of automobiles, ships and industrial machinery. As a result, fiscal 2007 crude steel
production in Japan increased 3% to a record high 121.52 million metric tons, surpassing
the previous record of 120.02 million metric tons set in 1973.
Nippon Steel continued making a large volume of capital expenditures to meet the
high level of orders for steel in Japan and other countries. Increasing capacity at facilities
used to manufacture and supply steel was a primary goal. These activities resulted
in an increase of 1.4 million metric tons in steel shipments compared with fiscal
2006, mainly for medium-high grade steel. We foresee a further increase in steel
demand over the long term as the global economy expands. To keep pace with this
demand, we will continue raising our production capacity in two ways. The first is by
realigning Group companies to reinforce our performance as a cohesive corporate
group. The second is by working with alliance partners in Japan and overseas to conduct
joint businesses and establish cooperative production systems.
Our operating environment became more difficult in the second half of the fiscal
year as prices of crude oil, scrap iron, freight and other commodities rose rapidly. We
also had to deal with an upturn in the cost of coking coal, a vital material for the production
of steel. Heavy rain in Australia, a major supplier of this coal, along with
export restrictions by China due to a cold winter combined to push prices up. We
responded by cutting costs wherever possible while raising prices to reflect our higher
operating expenses, but the cost of raw materials increased even faster and by a
greater amount than we had anticipated.
In fiscal 2007, our shipments of steel products increased 1.39 million metric tons to
32.90 million metric tons, and sales increased ￥512.2 billion, or 14.7%, to ￥3,994.5 billion.
Operating profit was down ￥38.6 billion to ￥475.9 billion. Earnings were
reduced by one-time charges totaling approximately ￥70.0 billion for inventory valuation
differences, revisions to Japan’s tax system and other issues. Operating profit
after excluding these charges was higher than in fiscal 2008(2008年報摘錄)