the fifth medium -term management plan explanatory meeting · 1) net sales: there was a...
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The Fifth Medium-Term Management PlanExplanatory Meeting
Chairman Hiroyuki Suzuki
Index
I Results and Reflections on the Fourth Medium-Term Management Plan P.2
II Overview of the Fifth Medium-Term Management Plan P.15
III (Reference) Business Environment Surrounding the Group P.34
March 28, 2018
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Maruichi Steel Tube Ltd.
I Results and Reflections on the Fourth Medium-Term Management Plan
2
I-1 Targets and Results of the Fourth Medium-Term Management Plan
3
Final year of the Third Medium-Term
Management PlanResults
Final year of the Fourth Medium-Term
Management Plan
FY2014Results
FY2015Results
FY2016Results
FY2017Projections
FY2017Targets
Net sales(billion yen) 152.7 144.9 137.2 153.4 185.0
Operating income(billion yen) 17.7 17.0 24.5 19.6 22.5
Operating margin 11.6% 11.7% 17.8% 12.8% 12%
ROE 3.9% 4.7% 7.4% 5.7% 6.5% and over
Shareholder return ratio (3-year
average)
52.2%(3-year
average)
255.2% 49.6% 48.6%70% and over
(3-year average)81.6% (3-year average)
Return of profit tosociety (3-year
average)
¥14 million(3-year
average)
¥21 million ¥22 million ¥23.5 million¥21 million
(3-year average)¥22.16 million (3-year average)
Targets achieved
Comparison of Domestic/Overseas Plans and Results
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1) Net sales: There was a considerable target shortfall due to the less-than-planned sales volume and a considerable drop in steel price
2) Operating income: Although the target was achieved both domestically and overseas in FY2016, there was a shortfall in FY2015 and FY2017
3) Operating margin: The target was achieved in FY2016 and FY2017 due to a recovery in revenue from overseas
4) ROE: Although the target was achieved with 7.4% in FY2016, ROE for FY2017 ended at 5.7% due to a decrease in income
5) Targets for shareholder return ratio and social contribution were achieved
(billion yen) Targets Results Targets Results Targets ResultsTotal net sales 174.2 145.0 180.5 137.2 185.0 153.4Domestic 103.5 91.4 107.3 88.7 108.5 96.3Overseas 70.7 53.6 73.2 48.5 76.5 57.1 (U.S.) 36.1 25.8 36.7 22.4 39.6 26.6 (Asia) 34.6 27.7 36.5 26.1 36.9 30.5Total operatingincome 20.5 17.0 21.9 24.5 22.5 19.6Domestic 18.0 17.3 18.6 19.7 19.1 16.6Overseas 2.5 (0.3) 3.3 4.8 3.4 3.0 (U.S.) 1.1 (1.0) 1.7 2.2 1.7 2.0 (Asia) 1.4 0.6 1.6 2.6 1.7 1.0Operating margin 11.8% 11.7% 11.8% 17.9% 12.2% 12.8%Domestic 17.4% 18.8% 17.3% 22.2% 17.6% 17.2%Overseas 3.5% -0.6% 4.5% 9.9% 4.5% 5.3%Exchange rate (yen) 115 121.05 115 108.84 115 112.37
FY2015 FY2016 FY2017
Capital Policy Targets and Progress
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Targets of final year of the Fourth Medium-Term Management Plan (FY2017)Average shareholder return ratio during the three years → 70% and over; FY2017 ROE → 6.5% and over
3.9%
5.0%
3.6%
5.0%
6.1%
3.9%
4.7%
7.4%
5.7%
70.3%53.7%
130.4%
61.5%50.5%
46.9%
255.2%
49.6%48.6%
0.0%
50.0%
100.0%
150.0%
200.0%
250.0%
300.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017(Projections)
ROE Shareholder return ratio
Shareholder return ratio: 3-year average of 81.6%
(Note) FY2015: A buyback of 2 million shares and a decrease in net income due to impairment of securities holdings raised the shareholder return ratio to 255%
(Note)
I-2 Results and Reflections 1) Domestic Results
i. Capital investments were made to streamline production and to strengthen the sales bases of Maruichi Kohan Ltd. (The total investment amount was ¥12.5 billion.)
ii. The Osaka Plant was consolidated into the Sakai Plant. (March 2016)
2) Results and Reflections Overseasi. MOST launched operations in the upper west coast of the U.S. and Canadaii. Leavitt remained in the black due to the recovery in U.S. steel market conditions and
other factors.iii. The three U.S. companies decided to replace facilities and establish new lines.iv. SUNSCO (HCM) had issues concerning sales capabilities and stable operation of
facilities in Vietnam and was unable to keep the business in the black.v. KUMA started operations of the Bangalore Plant and greatly expanded sales by
establishing additional large-diameter tube lines.vi. The launch of MPST’s new plant for automobiles and motorcycles was decided.
3) Capital Policy and Social Contributionsi. High dividend payout was made, and the shareholder return ratio target was achieved.ii. Social contributions were made in Japan and overseas to the fields of
education, culture, sports, medical care, and others.
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Capital Investment Results: Domestic: ¥12.5 billion; Overseas: ¥4.7 billion
Major capital investments during the Fourth Medium-Term Management Plan
Domestic Relocation of Yokohama Sales Office of Maruichi Kohan: ¥1.9 billion Sakai Plant: Renovation of No. 1 Unit and terminal piers: ¥1.5 billion Shikoku Maruichi: Solar power generation equipment: ¥0.65 billion Tokyo Plant: Renewal of No. 1 Unit: ¥0.5 billion Relocation of Hokuriku Sales Office of Maruichi Kohan: ¥1.2 billion Construction of new Tokyo Plant (cutting-to-size plant): ¥0.35 billion
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Overseas MMX: No. 2 Plant: ¥0.8 billion MAC: Facilities renewal: ¥0.6 billion KUMA : 4-inch mill: ¥0.2 billion SUNSCO: 2-inch mill: ¥0.2 billion
Trends in the amount of capital investment and depreciation (hundred million yen) Capital investment (Domestic)Capital investment (Overseas)
Depreciation (Domestic)
Depreciation (Overseas)
2012 2013 2014 2015 2016 2017
October 2015 Relocation of Yokohama Sales Office of Maruichi Kohan
March 2016 Completion of consolidation of Osaka plants into Sakai plant
April 2016 Began selling power, solar power generation equipment at the Shikoku Plant
August 2016 Completion of renewal construction of No. 1 Unit at Tokyo Plant
August 2017 Completion of renewal construction of galvanizing line at the Takuma Plant (Implemented inthree construction phases from 2015)
November 2017 Relocation of Hokuriku Sales Office of Maruichi Kohan (Added new plans to the Fourth Medium-Term Management Plan. Began operation on November 13)
January 2018 Completion of renewal construction of No. 1 Unit at the Sakai Plant (Mill, cutter, chamfering machine) (Implemented in three construction phases from 2015)
January 2018 Completion of renewal construction of No. 1 Slitter at the Sakai Plant
Domestic Capital Investment
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・ Acquired structural tube division of Evraz NAINC. in March 2015
・ Expanded business in the U.S. and Canada by further enhancing “Production Where Demand Exists” in the U.S. in cooperation with MAC (Los Angeles) and Leavitt (Chicago)
MAC(Los Angeles,
California)
Leavitt(Chicago,
Illinois)
MOST(Portland, Oregon)
MOST
MOST in the U.S.: Expanding sales on the U.S. West Coast and in Canada
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Trends in business performance (including HANOI) (Unit: million US$)
Net sales Operating income
161 (3)
205 2
256 (2)
196 5
December 2016 Results 202 17
December 2017 Projections 226 (1)
277 5Fourth Medium-Term Plan (Dec. 2017) Targets
December 2015
December 2014
December 2012
December 2013
Announced in November 2017
i. FY2016: Although a significant surplus was posted due to a recovery in steel market conditions, a deficit was posted in FY2017
ii. Unable to keep the business in the black due to the impact of protectionism in the export markets (U.S., Indonesia, Thailand, Malaysia, etc.) and issues concerning the sales capabilities and stable operation of facilities in Vietnam
⇒ Issues for the next Medium-Term Plan
SUNSCO (HCM) in Vietnam: Unable to keep business in the black
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• February 2015 No. 2 plant began operation
• August 2017 Purchased an adjacent 10,000m2-area to build a cutting plant
No. 1 plant No. 2 plant
Purchased area
MMX in Mexico: Continuing necessary investment in motorcycle related business
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• June 2015 Bangalore Plant began operation
• February 2017 4-inch mill for large-diameter tubes began operation
Bangalore Plant
2-inch mill 4-inch mill for large-diameter tubes
KUMA in India: Continuing necessary investment in automobile and motorcycle related businesses
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MAC(the U.S.)
LeavittChicago Plant
(the U.S.)
ISTW SemarangPlant
(Indonesia)
Maruichi Metal Product (Foshan) Co., Ltd. (China)
ISTW Jakarta Plant(Indonesia)
SUNSCO(Vietnam)
KUMA (India)Manesar Plant
SUNSCO (Hanoi)(Vietnam)
Asia Americas
Maruichi Metal Product (Tianjin) Co.,
Ltd. (China)
J-Spiral(Vietnam)
Maruichi Metal Product Wuhan Branch (China)
MARUICHIMEX(Mexico)
ISTW Cikarang Plant (Indonesia)
AMX(Mexico)
MOST(the U.S.)
KUMA (India)Bangalore Plant
MPST(Philippines)Scheduled to begin operation in 2019
: Began operation / expansion decided during the Fourth Medium-Term PlanOverseas Production Facilities
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Major initiatives in FY2017 (●Continuing●New)
Sponsoring the 69th Shōsōin Exhibition (from FY2012) Support for NPO Asia Prevention of Blindness Association (from FY2015) Sponsoring Osaka Philharmonic Association (from FY2015) Support for “iPS Cell Research Fund” at the Center for iPS Cell Research and Application,
Kyoto University (from FY2015) Sponsoring the “Theater of the Heart” activities of
Shiki Theatre Company (from FY2015) Sponsoring “Heisei Osaka Amanogawa Legend 2017” (from FY2016) ● Sponsoring “2025 Japan World Expo Committee”
Support promotional activities for Osaka/Kansai to host the 2025 World Expo (Official Supporter)● Support for students of Bal Niketan Senior Secondary School in India (KUMA)
Provide scholarships equivalent to an annual tuition at a senior secondary school in the Pilani ward in the state ofRajasthan for 200 students recommended by the school on the basis of their marks and families’ financial situation
● Support for KANSAI Tourism BureauSupport activities to advance Kansai-wide initiatives to promote tourism, with the aim of revitalizing the industry inKansai
● Support for relocation of RMH Osaka-SuitaSupport for relocation of an accommodation facility in Suita City, Osaka Prefecture, for families of children hospitalizedat the National Cerebral and Cardiovascular Center, to Northern Osaka Health and Biomedical Innovation Town (KENTO)
Providing approximately 0.5% of nonconsolidated net income after payment of dividends for cultural, educational, sports, environmental protection, and other activities
in local communities in Japan and overseas
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Social Contribution
II Overview of the Fifth Medium-Term Management Plan(April 2018 – March 2020)
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II-1 Business Environment Surrounding the Group
i. Japan: While there will be no sharp decline in the economy, steel demand is not expected to increase.
ii. Foreign countries: The U.S. economy will continue to remain strong and sustain a moderate growth. Emerging countries are expected to continue to achieve a high growth.
iii. The shift to overseas will continue in the automobile industry. Preparations for the shift to electric vehicles need to be started.
iv. Owing to the steady economy in each country, there will be no majordownturn in the steel price.
v. “Increasing profitability,” “increasing labor productivity,” and “procuring human resources” are the issues facing enterprises.
vi. An exchange rate of 110 yen/US$ is assumed.
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II-2 Targets of the Fifth Medium-Term Management Plan
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FY2017(Projections) FY2018 FY2019 FY2020
TargetsNet sales
(billion yen) 153.4 164.5 170.0 175.0Operating
income(billion yen) 19.6 18.9 19.6 24.0Operating
margin 12.8% 11.5% 11.5% 13.7%ROE 5.7% 5.3% 5.5% 6.5%
Shareholder returnratio 49.0% 50.0% 50.0% 50.0%
Social contribution (million yen) 23.5 30 30 30
Consolidated Business Results Projections by segment
売上高 比 率 営業利益 比 率 売上高 比 率 営業利益 比 率
日 本 96,305 62.8% 16,429 83.8% 106,000 60.6% 18,400 76.7%
北 米 26,557 17.3% 1,956 10.0% 32,000 18.3% 2,600 10.8%
ア ジ ア 30,538 19.9% 1,215 6.2% 37,000 21.1% 3,000 12.5%
調整額 0 0.0% 0 0.0% 0 0.0% 0 0.0%
合 計 153,400 100.0% 19,600 100.0% 175,000 100.0% 24,000 100.0%
【単位 百万円】
2018 年 3 月 期 予 想 第5次中計 2021 年3月期 目標
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[Unit: million yen]
Projections for Year Ending March 31, 2018Fifth Medium-Term Management Plan
Targets for Year Ending March 31, 2021
Net sales Ratio Operating income Ratio Net sales Ratio Operating
income Ratio
Japan
North America
Asia
Reconciliations
Total
Net sales target: FY2020: ¥175.0 billion
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Net sales: Increase net sales by expanding sales volume overseas and by recovering sales prices in Japan and overseas
Net sales/Foreign net sales ratio (¥hundred million, %)
Domestic net sales U.S. Asia Foreign net sales ratio
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Increase in overseas net sales related to building materials from 2009
2.1-fold increase
1.8-fold increase
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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Net sales for overseas building materials (Consolidated subsidiaries) (US$ thousand)
8.8-fold increase
6.6-fold increase
21
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Net sales for overseas automobiles and motorcycles (Consolidated subsidiaries) (US$ thousand)
Increase in net sales related to overseas automobiles and motorcycles from 2009
Operating income target: ¥24.0 billion; Operating margin target: 13.7%
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Operating income: Increase income by widening spread in Japan and overseas, and increase income by expanding operations overseas
Operating margin: Maintain high profitability in Japan and increase margin overseas
Operating income/Foreign operating income ratio (¥hundred million, %)
Domestic operating income U.S. Asia Foreign operating
income ratio
2009
Trends in operating marginOverseasJapanOverall
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ROE target: FY2020: 6.5%Shareholder return ratio (excluding share buybacks) target: 50% and over
Social contribution target: Provide approximately 0.5% of nonconsolidated net income after payment of dividends (¥30 million/year) for cultural, educational, medial care, sports, environmental protection, and other activities in local communities in Japan and overseas
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Shareholder return ratio (excluding share buybacks) and ROE (%) Shareholder return ratio (excluding share buybacks)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
II-3 Major Initiatives of the Fifth Medium-Term Management Plan
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Major Initiatives (1)
1. Commitments in Japan
i. Maintaining high profitability and further strengthening sales capabilities
ii. Responding to the shortage of workers and increasing productivity・Increasing production and clerical work efficiency using IoT and AI
Adoption of IoT in production lines; Introduction of AI-based businesssoftware for accounting/personnel/administrative operations
・Replacement of facilities, and review of recruitment policy and workstylesPromoting the acquisition of paid leave; Reducing overtime work
・Use of female human resources and foreigners
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Capital Investment Plans for the Next 3 Years(Domestic: ¥13.0 billion; Overseas: ¥8.0 billion)
Major capital investment plans ・Japan: Sakai: Renewal of electrical substation facilities, renewal of SR; Tokyo: Renewal of slitter;
Takuma: Renewal of rolling line; Nagoya: Renewal of 6-inch mill refining process/new installation of small-diameter tube mill; Maruichi Kohan Ltd.: Upgrade of warehouses at sales bases, etc.
・Overseas: The three U.S. companies: Renewal/establishment of 2-inch mill lines; MAC: Construction of warehouse; MOST: Construction of additional building; MMX and SUNSCO (HNI): Construction of additional building; KUMA: Enhancement of production capabilities; MPST inPhilippines: Construction of a new plant; SUNSCO (HCM): Enhancement of cold-rolling facilities, etc.
26z
4951
30
4951 30
Trends in the amount of capital investment and depreciation (hundred million yen)
Capital investment (Domestic)
Capital investment (Overseas)
Depreciation (Domestic)
Depreciation (Overseas)
2015 2016 2017 2018 2019 2020
Major Initiatives (2)2) Commitments Overseas
i. Three U.S. companies: Expanding operations using newly established or replaced facilities and by further strengthening marketing capabilities
Leavitt/MAC: Enhancing quality and productivity of small-diameter pipesMOST: Begin production and sales of small-diameter pipes; Expand product lineup
ii. SUNSCO(HCM): Keeping in the black is the foremost issue in the overseas businessReviewing unprofitable businesses; Strengthening domestic sales capabilities mainly for pipes that are unaffected by trade policies of export destinations;Reducing costs by improving facility operating rates and yield, and streamlining personnel in back-office divisions ⇒ keeping in the black
iii. Automobiles and motorcycles: Implementing capital investments and strengthening sales capabilities in line with the expanded production in each country
iv. Procuring talented local human resources and further level enhancement. Facilitating the replacement of employees dispatched from the head office with local human resources
v. Using overseas revenue to increase profit redistribution in Japan in the form of dividend, royalty, or the like
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Three U.S. companies: Further strengthening marketing capabilities using replaced or newly established facilities
i. Leavitt: Renewal of 2-inch mill line (operation scheduled to start in June 2018)ii. MAC: Construction of additional warehouse (4,600m2) (to be completed
in March 2018) Renewal of 2-inch mill line (to be completed in December 2018)
iii. MOST: Construction of additional plant (3,250m2) (to be completed in April 2018)and construction of additional 2-inch mill line(operation scheduled to start in October 2018)
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SUNSCO (HCM) in VietnamKeeping in the black is the foremost issue in the overseas business
No. 3: 2-inch mill
i. Reviewing unprofitable businesses
ii. Strengthening domestic sales capabilities mainly for pipes that are unaffected by trade policies of export destinations
iii. Reducing costs by improving facility operating rates and yield,and streamlining personnel in back-office divisions
⇒ Keeping in the black
Front: No. 1: 4-inch mill; Back: No. 2: 2-inch mill
Mexico, Vietnam (Hanoi), Philippines:Capital investments and construction of a new plant in line with the expanded production of automobiles and motorcycles
i. MARUICHIMEX S.A. de C.V. (MMX)Construction of an additional cutting plant by acquiring an adjacent area: approx. 3,150m2
ii. SUNSCO (HNI)Construction of additional plant: approx. 2,700m2
iii. Launch of Maruichi Philippines Steel Tube Inc.(MPST) in Philippines: operation scheduled to startin Spring 2019Site area of the new plant:approx. 30,000m2;Building: approx. 8,000m2
SUNSCO (HNI)MPST/planned site
MMX
MPSTConceptual drawing
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Using overseas revenue to increase profit redistribution in Japan in the form of dividend, royalty, or the like
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1404 2062 2284 2287 30714399 4908 6000
68674241 3518 4185
6130
70087725
9000
0
2000
4000
6000
8000
10000
12000
14000
16000
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2020
Dividends from overseas/Royalty/SV Fee
Royalty/SVFee Dividend
(US$ thousand)
Major Initiatives (3)3) Common Commitments in Japan and Overseas
i. Increasing labor productivity per working hour and labor cost・Domestic plants: Renewal of old facilities; Labor saving by automatic
operation using IoT technology and optimum operation and maintenance
・Domestic administrative division: Efficient clerical work and labor saving by introducing new systems incorporating AI technology to accounting/personnel/administrative operations
・Overseas: Increasing productivity by enhancing the level of local human resources
ii. Giving further consideration to the environment, enhancing energy efficiency, and strengthening safety measures(Reducing electricity consumption through a shift to LED lights; Chrome-free production, etc.)
iii. Proactively considering M&A and other business investments in Japan and overseas
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Major Initiatives (4)4) Shareholder-Focused Policy and Social Contribution Policy
i. Maintaining a high dividend payout ratio⇒Continuing dividend policy of “nonconsolidated ordinary income x (1-
effective corporate tax rate) x 50%”Returning the effect of the decrease in the effective corporate tax rate as dividendsMaintain minimum dividend of 50 yen per share
ii. Social Contribution:Continuing to provide approximately 0.5% of nonconsolidated net income after payment of dividends as social contribution・Japan: Continuing contribution to the fields of culture, art, sports promotion,
medical care, education, and natural environment protection・Overseas/Emerging countries: Increasing contributions to poverty
eradication, health care, medical care, and education promotion(Vietnam: Supporting the Asia Prevention of Blindness AssociationIndia: Offering scholarships to high school students in poor neighborhoods and creating jobs by expanding business)
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III (Reference) Business Environment Surrounding the Group(1) Economic growth forecast by country
The U.S. and emerging countries will maintain comparatively high growth rates.The Japanese economy will recover moderately. (However, the impact of a consumption tax hike is expected in 2020)
(Source: Prepared based on projections by IMF and others)
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2015 2016 2017 2018 2019 2020
Japan U.S. China India
MexicoVietnam Indonesia Philippines
Projections of economic growth rate
(2) Trends in domestic demand for steel
Demand for steel in Japan is gradually decreasing over the long term
(Source: Prepared based on a report by The Japan Iron and Steel Federation, etc.Projections for 2021: Documents published by Mizuho Bank, Ltd.)
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2017(projections)
2021(projections)
Demand for steel
Production volume of
crude steel
Domestic production volume of crude steel / Demand for steel (10 thousand tons)
(3) Global steel market conditions
The steel price will rise globally in line with the steel price hike in China(Source: Prepared based on CRU Index report)
US$/mt
36
(4) Shift to overseas production by Japanese automobile manufacturers
(Source: Prepared based on a report by the Japan Automobile Manufacturers Association, Inc., etc.)
Overseas production volume has nearly doubled from 2009
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Overseas ratio
Overseas production
Domestic production
Automobile overseas production volume (10 thousand units)
Plans and forward-looking statements herein are based on theCompany’s judgment drawn from currently available information.Please note that actual results may differ significantly from such plansand forward-looking statements due to various important factors.
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Maruichi Steel Tube Ltd.
Disclaimer