NIPPON YAKIN KOGYO CO., LTD

2025 will be Nippon Yakin Kogyo’s 100th anniversary. We aim to produce materials that will be useful to the next generation of society and be a good workplace for the next generation, and I feel that we have made leaps and bounds in the last few years. As I have told our employees ever since I was appointed as President in 2019, stainless steel and high-performance alloys, the materials we handle, are materials that are useful to society. I ask them to take confidence and pride in the fact that we handle products like this. In the years to come, we must not only work steadily toward our aims but promote this attitude within and outside the company.

Japan’s stainless steel industry has become consolidated among fewer manufacturers due to restructuring of the industry. By contrast, the capabilities of China’s industry have grown at a rapid pace over the last 20 years. As a result, stainless steel has fallen into chronic oversupply, particularly in East Asia.

Fortunately, I think that the Japanese stainless steel industry is one that has managed to maintain suitable prices despite soaring costs not only for raw materials but for energy, labor and resources as a result of global issues such as the pandemic and Russia’s aggression against Ukraine. By doing so, Nippon Yakin Kogyo was able to finish FY2023 with good results. However, these results were due partly to inventory appraisal gains so I do not feel that we should be complacent.

In high-performance alloys, it remained difficult to shift inventory in durable consumer goods areas such as sheathed heaters and bimetals for household appliances due to factors such as a decline in housing projects in the USA, but strong performance was seen in renewable energy areas such as solar power in China.

However, in terms of our future outlook, we fear that global supply chain disruptions will impact our business in various ways, causing issues.

With the future so opaque, what will growth mean for us as we look toward 2025, the year of our 100th anniversary, and 2030, a milestone year for carbon neutrality? What should our finances be like? What should our product structure and overseas sites be like? We want all of our staff to consider these questions together, and it was with this in mind that we considered “What we aim to be in 2030” and the Medium-Term Management Plan that will serve as an action plan.

“What we aim to be in 2030” encompasses “Resilience”, based on the importance of diversity, and “Sustainability”, with a view to sustainable business operations. Stainless steel is the subject of renewed hopes as a material suited to the age of sustainability and SDGs. This has placed a new spotlight on the carbonless nickel smelting performed at our Oheyama Plant, and we are aware that there has been a significant increase in industries that need stainless steel and high-performance alloys. In Medium-Term Management Plan 2024, we aim to focus on increasing the quality of our products, personnel and work practices in order to meet those needs. With this in mind, we have set “100th year message for the future” as the tagline.

We believe that achieving carbon neutrality and expanding our production and sales of high-performance alloys are critical issues to which the company must dedicate all of its capabilities, and strategic investments in these areas are the pillar of this Medium-Term Management Plan.

Reorganizing our product portfolio to ensure diversity is another important perspective. We have responded to oversupplies of stainless steel like this in the past too, utilizing the facility characteristics and technology at our Kawasaki Plant to pivot quickly the production of high-performance alloys and achieve growth by meeting the needs of a new market. As we work toward “What we aim to be” now, particularly in Medium-Term Management Plan 2024, I want to continuously have an antenna out and be acutely attuned to the needs of the market.

In addition, we aim to bring about qualitative growth in our employees and ensure that each of them lives a rich life. I think that Medium-Term Management Plan 2024 is a key three years for this.

■ Meeting domestic and international needs with a flexible framework

Our Medium-Term Management Plan 2024 has three basic strategies.

Our first basic strategy is “Seek to meet the needs of increasingly advanced markets by developing and supplying industrial materials that create new value”. The water electrolysis market (hydrogen energy) was identified as a target market for growth. The hydrogen field requires physical properties suited to various hydrogen environments. At present, we are outsourcing measurements for this, but we are preparing to build a new material evaluation and testing facility for hydrogen environments at our Kawasaki Plant so that we will be able to do this work internally. Another target we are considering for material supply is the nuclear energy field.

We consider the Indian market our biggest target area for growth. There is no doubt that India will begin making the same environmental investments that have happened in China, and there are already clear signs that this will happen. However, while we already have a record of exports to India, it is still unclear whether the market will become as large or as advanced as China’s.

Our second basic strategy is “Build an efficient production framework to increase our technical advantage and adapt to changes”. We believe that the most important thing is to maintain suitable production capacity for this company while also sufficiently preparing so that we will not miss out on sales opportunities, and we will put in place a framework that allows for expansion of production when necessary.

In particular, China is catching up quickly in the area of high-performance alloys. We have no choice but to focus on products that are highly advanced and difficult to produce, which creates bottlenecks in the production process. This is not the first time our problem has been an inability to supply enough products, not an inability to sell what we have produced. We need to clear those bottlenecks and increase our production capacity for difficult-to-produce materials, while ensuring that the framework we build is flexible enough to balance sales and production.

The issue of being unable to produce enough to meet demand is also a matter of size. We are taking measures to address this and utilizing the facilities of Nanjing Iron & Steel Co., Ltd., the Chinese partner of our joint venture, to commercialize high corrosion-resistant and heat-resistant nickel alloy ultra-wide plates that we cannot sufficiently produce at our own mills. We feel that this will be a major advantage when it comes to meeting the demand for solar power-related products.

With regards to working toward carbon neutrality, two major strategies will be employed during this Medium-term Management Plan period: measures for ferronickel alloy production, particularly at our Oheyama Plant, and changing the fuel at our Kawasaki Plant.

In terms of stainless steel, heavy responsibilities will fall on us as a supplier. We believe that the need to properly meet the expectations of distributors and customers in Japan is another reason why a steady supply of stainless steel is one of our core responsibilities.

In our second basic strategy, we are also working to diversify our raw materials and achieve more sustainable procurement. Our Oheyama Plant used to mass-import nickel ore from New Caledonia and Indonesia and then used coal as a reductant to produce ferronickel alloys. Being able to purchase nickel ore cheaply made us competitive, but as resource nationalism progressed, avenues for importing nickel ore became limited and costs increased, in addition to the growing necessity of a new material procurement method from a sustainability perspective. Addressing the use of coal at our Oheyama Plant has also become an urgent issue in recent years as a carbon neutrality measure.

With these points in mind, we have been switching from ore to recycled materials (urban mining) for our materials. We are working on initiatives such as recycling of 200 raw materials, managing recycled materials and automating ingredient analysis at our Oheyama Plant. Basically, because recycled materials contain more nickel than nickel ore, less of them are needed to produce ferronickel alloys. This means that using recycled materials decreases CO2 emissions. Other measures we are taking to minimize CO2 emissions in our ferronickel alloy production include switching our energy source from coal to LNG and renewable fuels, and switching the reductant for our nickel ore from coal to materials such as waste plastic.

When we consider the global competition for resources that could occur in future, we believe that our steady work on material procurement and environmental measures will give us a competitive edge. In addition to sourcing scraps globally, we will thoroughly reuse scraps from our own plants, such as scraps from processing. While we are a manufacturer of stainless steel and high-performance alloys, we are also a user of urban mines through our recycling of materials such as nickel. I think that position is arguably extremely interesting.

In terms of products, we can have a reputation for having what people need. In terms of recyclable materials, we can have a reputation for accepting what people want to get rid of, or for being environmentally friendly. I want us to become a company with that kind of positive reputation and broaden the loop of circular societies.

Our third basic strategy is “Establish a sustainable management foundation that is resilient to changes in our environment”. For this, we will make strategic investment in human capital. The Japanese stainless steel industry itself is an industry that grew after World War II not only by adopting new technology from overseas but by developing personnel whose technical capabilities drove growth. We, too, respond to progressions in society by increasing workers’ pay, as well as expanding our welfare systems and carrying out reskilling initiatives.

When it comes to empowerment of women, however, while women are advancing in operational roles such as inspection work and facility maintenance, there are particularly significant hurdles in technical roles on production sites. We are currently carrying out hard measures such as increasing our women’s restrooms and changing rooms. With regards to night work, I want to carry out reforms of our working practices that will alleviate the burden on our male and female personnel alike, such as introducing automated systems.

Along with reforms of our working practices, the utilization of digital technology is another point that we need to tackle in future. We have already begun using AI for purposes such as analysis of operation technology, but only when we have truly achieved digital transformation (DX) can we expect to see sustainable growth. I think the hurdles are high, but we have to try.

The other human issue we must tackle is providing opportunities for personal growth and maintaining and increasing motivation. From this perspective, I think the first thing it is important to do is to give opportunities to young personnel. If the company is in trouble, we will not be able to find workers. Workplaces will become fixed and it will not be possible to make effective use of transfers. I think it will be important to invigorate the company so that young people will choose to work here, and then give them opportunities to experience various roles.

Incidentally, I worked in personnel affairs for a long time, but my first role in this company was in a department that handled cost calculations for our plants. After working there for a year and a half, I worked in sales at our Osaka Branch and production management at our Kawasaki Plant, and then I worked in personnel affairs until I got promoted to management. When I look back now, I realize that working in various departments, even for that short time, made me who I am today.

In 2021, after interdepartmental discussions throughout the company, we identified six sustainability issues of particular importance and announced these as issues of materiality. Each of these six issues is directly connected to our Management Philosophy.

When we established “What we aim to be in 2030” and our Medium-term Management Plan, we applied each of these six issues to specific measures and established plans for each department and plant to take actions based on these. We have established KPIs for each department and plant and made it possible to check the progress of these.

Fast judgments and clarification of responsibilities will be important for solving these issues. We believed that department leaders needed a venue where they could take the responsibility to speak up, so we established the Sustainability Strategy Promotion Committee with myself as the Chairman. Decisions made through discussion by this committee are immediately enacted and specific measures are taken with a focus on speed.

I believe that in order to build a sustainable business, the most important thing is to earn the trust of our customers. I think that by providing value to customers and building a sustainable business, we make our employees happy, and that drives society and the economy.

The products we handle are materials that are entrenched in people’s daily lives, provide support in our lives, and have the potential to make major contributions to the carbonless society we help to build in future. I want the value of this to be properly recognized by our customers, I want our employees to take confidence and pride in the fact that they are involved in such a business, and I want to deliver strong returns to our shareholders. That is the most important thing to me.

Behind all this are the progress we have made through our struggles in the past. At first, we only handled stainless steel and our options for procuring materials were limited, and as a result we were not able to adequately meet our customers’ needs. But we took one step at a time, tenaciously made improvement after improvement, and learned how to provide the diversity our customers needed, and that is how our business survived.

There is no doubt in my mind that producing products from diverse materials, and having diverse people involved in the thought process of our efforts to sell them will become more and more important in future. I think that in order to accomplish this, we will also need to become more diverse and flexible as a company through initiatives such as gender equality.

100 years is not our goal. I want to make it a new start for the next 100 years, refining our unique technology to provide our stakeholders with new value.