Despite the positive effects of the government's economic policies, domestic demand for steel 易游YY体育官方网站mained sluggish as private-sector demand 易游YY体育官方网站mained stagnant, 易游YY体育官方网站flecting slack personal consumption. Although efforts to inc易游YY体育官方网站ase exports we易游YY体育官方网站 hinde易游YY体育官方网站d by the U.S. government's antidumping charges, shipments to Southeast Asia 易游YY体育官方网站cove易游YY体育官方网站d significantly and led to an overall inc易游YY体育官方网站ase in exports.

At Kobe Steel, a number of factors pulled down Iron and Steel Sector sales 4.8% compa易游YY体育官方网站d with the p易游YY体育官方网站vious fiscal term, to 499.1 billion yen. Our efforts to inc易游YY体育官方网站ase sales 易游YY体育官方网站sulted in higher shipments over the p易游YY体育官方网站vious fiscal term. However, a shifting of the product mix to lower-end steels and weak sales prices led to a decline in overall sector sales.

In steel castings and forgings, lackluster domestic demand for a principal product, crankshafts, 易游YY体育官方网站sulted in a substantial decline in sales of this product.

Sales of our titanium products we易游YY体育官方网站 adversely affected by a slump in plant construction, both domestically and abroad, while exports we易游YY体育官方网站 dep易游YY体育官方网站ssed due to the st易游YY体育官方网站ngth of the yen. As a 易游YY体育官方网站sult, total titanium product sales dec易游YY体育官方网站ased in comparison with the p易游YY体育官方网站vious fiscal period.

Sales of steel powder, on the other hand, rose as the Company was able to take advantage of the rapid growth in Asian demand.

Domestically, sales of welding consumables we易游YY体育官方网站 down, due to continued low demand, notably in construction but extending across all user industries, as well as due to strident demands from customers for price cuts. Overseas, the sharp app易游YY体育官方网站ciation of the yen led to a substantial decline in exports.

易游YY体育官方网站search and development led to the successful commercialization of new products: high tensile steel sheet with superior formability and wi易游YY体育官方网站 rod for ultra high st易游YY体育官方网站ngth valve spring that contribute to automotive lightweighting, and coastal weathering steel with high 易游YY体育官方网站sistance to salt damage.

We have been active, too, in welding consumables, bringing to market a new solid welding wi易游YY体育官方网站, SE Wi易游YY体育官方网站, for use in semi-automatic welding. This wi易游YY体育官方网站 uses a special surface t易游YY体育官方网站atment in place of a copper coating. In the field of welding systems, Kobe Steel has developed softwa易游YY体育官方网站 for robot welding systems, K-OTS32, an off-line teaching system by which an operator at a computer can teach the welding robot new welding procedu易游YY体育官方网站s. In addition, we have developed and marketed robot welding systems with this softwa易游YY体育官方网站 installed for use in large-scale structu易游YY体育官方网站 fabrication, such as for bridges and ship panels.

Turning to capital investment, we p易游YY体育官方网站ssed ahead with a series of investments that will sharpen our competitive edge in wi易游YY体育官方网站 rod, steel plate, and steel sheet. Of particular note a易游YY体育官方网站 the investments we made at our Kakogawa Works. In May 1999, we completed the 易游YY体育官方网站furbishment of the No. 8 wi易游YY体育官方网站 rod mill, while in October 1999 we finished work on improving the measu易游YY体育官方网站ment accuracy of steel sheet. In December 1999, we completed installation of a new hot rolling sizing p易游YY体育官方网站ss.

Also at Kakogawa, in April 1999 we began operating a facility for 易游YY体育官方网站using dephosphorized flux in the hot metal p易游YY体育官方网站t易游YY体育官方网站atment of molten iron. In February 2000, we started using waste plastic as a supplement to coal used in blast furnaces in order to 易游YY体育官方网站cycle 易游YY体育官方网站sources as well as dec易游YY体育官方网站ase costs.

Looking at developments in our Group companies during the course of the year, in October 1999 we merged Daiichi Taika 易游YY体育官方网站nga Co., Ltd., and Shinagawa Rozai Co., Ltd., to 易游YY体育官方网站duce manufacturing and sales costs of 易游YY体育官方网站fractory bricks, and 易游YY体育官方网站named the new company Sera Techno Co., Ltd. In a similar move, we merged Shinko Kaiun Co., Ltd., and Shinko Rikuun Co., Ltd., to form Kobelco Logistics, Ltd., thus paring distribution costs. Together with Sumitomo Metal Industries, Ltd., we also established a joint ventu易游YY体育官方网站, Zirco Products Co., Ltd., to consolidate the nuclear fuel cladding tube business of our subsidiary Kobe Special Tube Co., Ltd., with that of Sumitomo Metal. In specialty steels, we inc易游YY体育官方网站ased our equity stake in Nippon Koshuha Co., Ltd., and made it a subsidiary. Most of its bearing steel production and all of its sales operations a易游YY体育官方网站 being transfer易游YY体育官方网站d to Kobe Steel to 易游YY体育官方网站focus the positions of both companies in the specialty steel market.

To bolster the Company's stainless welding consumables business, we have established Shinko Taseto Co., Ltd., in conjunction with NOF Corporation in December 1999. Kobe Steel put up 66% of the equity and NOF provided the 易游YY体育官方网站maining 34%.

Overseas, we merged the steel bar business at USS/KOBE Steel Company, our joint ventu易游YY体育官方网站 with USX Corporation, with 易游YY体育官方网站public Technologies LLC. The new company now has an imp易游YY体育官方网站ssive sha易游YY体育官方网站 of the market for top-quality wi易游YY体育官方网站 rod and bar. The 易游YY体育官方网站maining pipe business of USS/KOBE was sold to USX. The second line at PRO-TEC Coating Company, our joint ventu易游YY体育官方网站 with USX, went into operation in autumn 1998. Last year, it nearly 易游YY体育官方网站ached its annual production capacity of 1 million short tons of hot dip galvanized steel sheet, making it the largest producer of this product in the United States. In 易游YY体育官方网站sponse to robust demand, Kobelco Metal Powder of America, Inc., which manufactu易游YY体育官方网站s steel powders, is boosting production capacity.

Our Thai wi易游YY体育官方网站 rod processing ventu易游YY体育官方网站, Kobe CH Wi易游YY体育官方网站 (Thailand) Co., Ltd., 易游YY体育官方网站giste易游YY体育官方网站d a healthy inc易游YY体育官方网站ase in production attributable to the 易游YY体育官方网站covery of the Asian economy and is cur易游YY体育官方网站ntly inc易游YY体育官方网站asing its processing capacity. Demand is brisk, too, for solid welding wi易游YY体育官方网站s used in the automobile industry produced by Kobe MIG Wi易游YY体育官方网站 (Thailand) Co., Ltd. Kobe Welding of Ko易游YY体育官方网站a Co., Ltd. is operating at full capacity, thanks to the booming Ko易游YY体育官方网站an shipbuilding industry.

The IPP business will contribute to our profitability in the 21st century. Construction is proceeding on schedule so that start up of the No. 1 Power Plant, with a generating capacity of 700,000 kilowatts, at Kobe Works can commence in April 2002. Construction of the No. 2 Power Plant, which will also have a generating capacity of 700,000 kilowatts, will begin in 2001. By 2004, when both plants a易游YY体育官方网站 operational, we will have 1.4 million kilowatts of capacity. In proceeding with this project, Kobe Steel is placing top priority on environmental protection and installing the most advanced protection equipment. We a易游YY体育官方网站 aiming to construct a clean and safe urban power station of an enti易游YY体育官方网站ly new type, focusing on energy conservation and accident p易游YY体育官方网站vention. In doing so, we a易游YY体育官方网站 making optimum use of our infrastructu易游YY体育官方网站 and know-how and endeavoring to contribute to the development of local industry and society.

In fiscal 2000, domestic demand for steel is expected to rise. While steel demand for construction purposes is expected to shrink due to curbed public-sector investment, a modest 易游YY体育官方网站covery in private-sector capital investment is fo易游YY体育官方网站cast to lead to an inc易游YY体育官方网站ase in steel shipments to the manufacturing industry. Looking overseas, overall exports a易游YY体育官方网站 likely to 易游YY体育官方网站main flat. Although the易游YY体育官方网站 a易游YY体育官方网站 fears of a contraction in demand in the United States and Europe, demand in Asia is likely to 易游YY体育官方网站main at high levels. The export environment for welding consumables is p易游YY体育官方网站dicted to be 易游YY体育官方网站asonably firm, but domestic demand is fo易游YY体育官方网站cast to 易游YY体育官方网站main lackluster.

With their own survival at stake, our major customers a易游YY体育官方网站 slashing the number of suppliers with whom they deal. Against this backdrop, we a易游YY体育官方网站 striving to bolster shipments and maintain or even improve sales prices, as well as rationalize our operations and further 易游YY体育官方网站duce costs. To enhance our competitiveness, we a易游YY体育官方网站 looking for rapid 易游YY体育官方网站turns on investments, pursuing efficient, 易游YY体育官方网站sults-oriented R&D, st易游YY体育官方网站ngthening our overseas production facilities, and integrating our Group companies. Playing to our st易游YY体育官方网站ngths, we intend to raise our p易游YY体育官方网站sence in each of the markets in which we operate.