Nippon Steel Corporation, Sumitomo Metal Industries, Ltd. and Kobe Steel, Ltd. have signed a Memorandum of Understanding, which ensures the process for the three companies to cooperatively study the impacts on the strategic alliance and countermeasures in the event that an unsolicited offer is made to one of the three companies. The MOU also stipulates, among other things, that studies should continue on measures to prepare for potential unsolicited offers.

Cooperative measures the three companies have been steadily implementing are:

• Nippon Steel and Kobe Steel have been supplying hot-rolled steel coils to Sumitomo Metals respectively, and Kobe Steel has been supplying hot-rolled titanium sheet for Sumitomo Metals.
• With respect to joint use of iron- and steelmaking facilities of Sumitomo Metals, Sumitomo Metals has already started supplying steel slabs to Nippon Steel. Similar supply to Kobe Steel is expected to start in the near future. Gradual expansion in quantity and scope of such transaction is intended, including in the area of high-grade steel that is steadily increasing in demand.

In addition, the three companies have agreed to deepen their cooperation with thsoe activities:

• Mutual licensing of technologies aimed to strengthen cost competitiveness and to improve technology of each of the companies in the field of ironmaking, within the framework of joint studies and mutual licensing of technologies mostly related to upstream processes.
• Cut procurement costs of materials at each of the companies.

Furthermore, Nippon Steel and Sumitomo Metals are jointly pressing on with the following activities:

• As part of the cooperation in the field of environment and recycling, Nippon Steel will pre-treat waste plastics and Sumitomo Metals will burn them in its coke ovens. (The activities are to be implemented in the first half of 2006FY.)
• Integration of cast rolls businesses by the two companies’ subsidiaries.

Unsurprisingly, Nippon Steel and Kobe Steel are combining their efforts as well:

• Mutual cooperation in the fields of environment and recycling.
• Supply of mold pig iron from Kobe Steel to Nippon Steel in response to Nippon Steel’s plan on relining of blast furnaces.

The three companies have purchased the shares of each other for the sake of smooth business relations. Thus, Nippon Steel now owns 5.01% of Sumitomo Metals; Sumitomo Metals owns 1.81% of Nippon Steel; Nippon Steel owns 2.05% of Kobe Steel; Kobe Steel owns 0.41% of Nippon Steel; Sumitomo Metals owns 2.05% of Kobe Steel; and Kobe Steel owns 1.71% of Sumitomo Metals.