Industrial Policy - Observation & Suggestion · 1958 USIMINAS was established as a joint venture between Japan and Brazil. Equity share: Japan Group 40%, Brazilian Government Group

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Industrial Policy

- Observation & Suggestion -

August 28, 2017

Nippon Steel & Sumitomo Metal Corporation


Overview


Brazilian Economy

Japanese Foreign Direct Investment (FDI) in Brazil

• More than 450 Japanese companies are operating in

Brazil.

• Japan ranks 6th as a foreign investor in Brazil

• Brazil is in the 10th position as a destination of

Japanese FDI.From “Joint Report by the Brazilian National Confederation of Industry -

CNI and the Japan Business Federation- Keidanren” (September 1, 2015)

Prospective

• Brazilian GDP: 1.7% growth in 2018, 2% in 2019 (IMF)

• Japanese FDI in Brazil is expected to continue growing.

• Development of business environment will further

facilitate FDI from Japan.


Steel Market in Brazil: Growth Potential

Steel Demand by Area (2016CY)

(Source： World Steel Association)

1 China 681

2 USA 92

3 India 84

4 Japan 62

5 S. Korea 57

6 Germany 40

7 Russia 38

8 Turkey 34

9 Mexico 25

10 Italy 24

11 Brazil 18

Even in the downside phase, steel demand in Brazil is

still very large in the worldwide market.

Steel DemandWorld Total 1,515MMT

65

Central & South America

68149CIS

62

Japan

57

132

NAFTA198

Europe

S.Korea

115

ASEAN5,

Other Asia 38

Africa

53

MiddleEast

7Oceania

84

India

China

2017 Forecast

18.4 mil ton(Source: IABr)


Steel Market in Brazil: Growth Potential

Steel demand per capita is still at a low level.

Population is increasing.

Huge potential for steel demand increase.

(Source： World Steel Association)

0

200

400

600

800

1,000

1,200

1,400

'55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10 '15

JapanChinaS. Korea

S. Korea:1,114

Japan: 535China: 509

ASEAN5: 134Brazil: 116India: 70

Cf. Steel Demand per Capita(crude steel equivalent)208

229 238

155

116

60

80

100

120

140

160

180

200

100

120

140

160

180

200

220

240

19

931

994

19

951

996

19

971

998

19

992

000

20

012

002

20

032

004

20

052

006

20

072

008

20

092

010

201

12

012

20

132

014

20

15

20

30E

20

50E

Millionpeople

Kg per capita

Population(left axis)

Steel Demand per Capita(crude steel equivalent: right axis)

15%up

Steel Demand per Capita and Population in Brazil


Global Business Development of



ArcelorMittal 95.5

Baowu Steel 63.8

Nippon Steel &

Sumitomo Metal46.5

Hebei Steel 46.2

POSCO 41.2

Shagang 33.3

Ansteel 33.2

JFE 30.3

Shougang 26.8

TATA 24.5

1 Nippon Steel 28.4

2 POSCO 27.7

3 Arbed 24.1

4 LNM 22.4

5 Usinor 21.0

6 Corus 20.0

7 ThyssenKrupp . 17.7

8 Baosteel 17.7

9 NKK 16.0

10 Riva 15.6

11 Kawasaki Steel . 13.0

12 Sumitomo Metal 11.6

21 Bethlehem 9.1

24 LTV 7.4

34 Iscor 5.5

TATA

ArcelorMittal 116.4

Nippon Steel 35.7

JFE 34.0

POSCO 31.1

Baosteel 17.7

TATA 26.5

Angang 23.6

Shagang 22.9

Tangshan Steel . 23.3

U.S. Steel 23.2

Sumitomo Metal 11.6

（Source： World Steel Association）

2000CY World 849

Crude steel production Mil. MT/year

2007CY World1,346 2016CY World 1,630

Who we are.

JV Partner

Strategic Alliance Partner


32.5

53.2

27.4

NSSMC Company A Company B Company C

62.9966

503

141

NSSMC Company ACompany BCompany C

1,274

R&D Expense (2014)International Patent Application Published : 2010-2014

bn¥Patents

High Grade Steel Strategy

R&D manpower800 Reserchers

Holding 27,000 patents in 70 countries

NSSMC Named a Clarivate Analytics

(former Thomson Reuters) Top 100 Global

Innovator in 2016 for Fifth Consecutive

Year Feb.2017

R&E Center

Futtsu

Amagasaki R&D

Center


NSSMC’s global supply network

- Various products, countries and partners

*¹ Including projects which will start operation by March 2014

Integrated

steel

works

AutomotiveConstructi

on,

packaging

Railway

partsEnergySteel

sheet

Pipes &

tubes, bars

& wires

Crank-

shafts

China

ASEAN

India

USA

Mexico

Brazil

Middle

East,

Africa


Major Manufacturing & Sales Bases of NSSMC

Ho Chi Minh

New York

Chicago

Houston

Mexico

Belo Horizonte

Sao Paulo

Sydney

Jakarta

Singapore

Bangkok

Guangzhou

Shanghai

Beijing

New Delhi

Dubai

Dusseldorf

Flat products

Construction usage

Railway, Automotive &Machinery parts

Bar & Wire Rod

Pipe & Tube

Overseas Office



in Brazil


NSSMC’s Business Bases in Brazil

Ipatinga Works(including Unigal)

Cubatao Works

Belo Horizonte (USIMINAS – Headquarters)

VSB

NIBRASCO (Pellet)


USIMINAS - History

1956 President of Brazil requested Japan to assist

constructing integrated steelworks in MG.

1957 Japan and Brazil signed the agreement for the

joint establishment of a steel company.

(This year is the 60th anniversary.)

1958 USIMINAS was established as a joint venture

between Japan and Brazil.

Equity share: Japan Group 40%, Brazilian Government Group 38%

Construction: Directed by an assigned director of Yawata Steel (now NSSMC)

Construction assistance：518 people were dispatched from Japanese steel companies.

(Companies integrated into NSSMC accounted for 90%, 466 people)


1966 onwards NSSMC has continued 48-years Technical Assistance to USIMINAS.

1999 USIMINAS and NSSMC established JV

(UNIGAL) producing galvanized steel sheets.

NSSMC has licensed related technology.

No.1 CGL： Start-up in Oct. 2000, Annual capacity 480,000 tons

No.2 CGL： Start-up in May 2011, Annual capacity 550,000 tons

NSSMC has licensed the most advanced technologies related to high grade heavy plate (CLC) to USIMINAS, as the first licensee in the world.

USIMINAS - History


USIMINAS


USIMINAS - Overview

<Ipatinga Works>

– Capacity: Crude Steel 5 million ton /year

Blast Furnace x 3 (885m3 x 2, 3162m3 x 1)

– Products: Heavy Plate, Hot Rolled Steel, Cold Rolled

Steel, Hot Dipped Galvanized Steel

<Cubatão Works>

– Products: Hot Rolled Steel, Cold Rolled Steel


USIMINAS - Overview

● 2012 Ternium joined a control group of USIMINAS

21.2%

19.9%

4.9%19.8%

11.4%

22.8%

Shareholding of ordinary shares as of July 2017

NSSMC Gr

Ternium Gr

PU (Usiminas Pension Fund)

Others

Control

Group

These 3 entities form a control group of Usiminas.


Observation & Suggestion


Observation - Areas for Consideration

1. Protection of Legitimate Expectation of

Investors (e.g. Fair Competition)

2. Predictable and Timely Administrative

Remedies and Actions

3. Timely Legal Remedies (“Justice delayed is

justice denied.”)


Suggestion – Possible Solution

EPA: Expected to provide following mechanisms

1. Fair and equal treatment of FDI

2. Bilateral mechanism for governmental and

business community representatives to

discuss issues on how to improve the

business environments in Brazil and Japan

3. Bilateral mechanism for FDI to convey its

concerns about the business environment to

the host state

Documents

Industrial Policy - Observation & Suggestion · 1958 USIMINAS was established as a joint venture between Japan and Brazil. Equity share: Japan Group 40%, Brazilian Government Group