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ANNUAL REPORT 2011

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DISCOVERING OUR POTENTIAL
Operations

Metals Group - Divisions & Unit

Steel Business Division

  • Metal One Business Unit
  • Steel Investment and Business Development Unit
  • Components Business Development Unit

Harnessing the collective capabilities of MC and working together with key subsidiary Metal One Corporation, a joint venture created in 2003 with the former Nissho Iwai Corporation (now Sojitz Corporation) that is the industry's largest trading firm specializing in steel products, the Steel Business Division is constructing and developing a global value chain for steel products. In the upstream sector of this value chain, the division is taking capital stakes in steel businesses in countries such as Brazil as part of efforts to deepen ties with steelmakers. In the downstream sector, MC is developing operations for pressed steel auto parts in Thailand, Australia and elsewhere. Within the midstream sector, the emphasis is on rationalizing and reinforcing the steel product distribution value chain through Metal One, a core contributor to divisional earnings. At the same time, MC is looking to develop the business by strengthening relations with key industries and by quickly anticipating market needs.

Global demand for steel, which nosedived temporarily due to the global recession, has resumed a growth trajectory along with rapid economic recovery in emerging markets, particularly in Asia. In 2010, world steel production set a new record on the back of this growth and is expected to increase further over the medium and long terms. However, demand in the Japanese domestic market is expected to reach only around 80% of its peak level, due to a limited recovery in domestic demand, although the market has turned the corner after temporarily declining.

For Metal One, the year ending March 2012 will be the last year of its third Midterm Consolidated Management Plan, which was announced in June 2010. Under this plan, in the Japan market Metal One aims to establish a more solid position based on the company's strong operating base. In overseas markets, Metal One aims to capitalize on growing demand by strengthening and expanding businesses in Asia and North America, where it already conducts various businesses, while forging ahead with the development of new businesses in Brazil, China, India and other emerging markets.

Specifically, in Japan, Metal One has established a supervisory management company for the steel processing service centers business, as well as restructured steel pipe and tubular product operations. Overseas, in addition to strengthening the functions of Soluções em Aço Usiminas S.A. (Solutions Usiminas), which was established in Brazil in the year ended March 2010, Metal One established new service centers in Mexico, China, India and elsewhere. Metal One has also begun efforts to create businesses in new fields such as the environment and renewable energy.

Looking ahead, this division will continue to develop strategic businesses in various markets in the pressed steel auto parts field and develop the steel business, centered on Metal One. Our aim is to consistently provide optimum steel products as well as logistics and services.


Metal One has more than 70 service centers in Japan and other countries around the world, providing comprehensive services, including steel processing, storage and delivery management.

Metals Group Value Chain
Metals Group Value Chain
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Ferrous Raw Materials Division

  • Ferrous Raw Materials Sales and Marketing Business Unit
  • Thermal Coal Business Unit
  • Iron Ore Business Unit

  • Stainless and Specialty Steel Raw Materials Business Unit
  • MDP Unit

This division is focusing efforts on reinforcing the business through resources investment as well as in trading.

The investment business provides a major pillar of sustained earnings growth for the division. MC's coking coal business in Australia, owned through subsidiary Mitsubishi Development Pty Ltd, boasts the largest output in the world and plans call for further expansion in the future. MC also has substantial investments across a wide range of businesses, including the production of stainless steel raw materials and iron ore, as well as the production of coal and uranium for use as fuel for power generation. In particular, MC is expanding production capacity at several projects in anticipation of future growth in global demand. These include ferrochrome production by Hernic Ferrochrome (Pty) Ltd. in South Africa and iron ore projects in Chile through Compañía Minera del Pacífico S.A. (CMP) and in Canada through Iron Ore Company of Canada (IOC).

In trading, the division trades coking coal, thermal coal and iron ore as well as materials for production of stainless and specialty steels on a global basis.

Global demand for ferrous raw materials and fuel for power generation dipped temporarily from 2008, but picked up gradually in the second half of 2010 on the back of economic recovery in emerging markets such as China. Demand is projected to increase steadily over the medium and long terms, underpinned by robust growth in such markets, centered on Asia. Based on this projected demand trend, the division is focused on ensuring future stable supply capacity for materials and fuels, and is conducting strategic business development activities to this end.

In Australia, MC has invested in a joint venture with local producer Murchison Metals Ltd. to develop an iron ore deposit at Jack Hills along with rail and port infrastructure. In April 2010, Compañia Minera Huasco S.A. (CMH), an iron ore project in Chile in which we owned a 50% interest through our subsidiary M.C. Inversiones Limitada, merged with CMP, a subsidiary of Chilean iron ore and steelmaking company Compañía de Acero del Pacífico S.A. We own a 25% stake in the new CMP. Also in April 2010, commercial operations began at the Clermont thermal coal mine, one of the largest coal mines in Australia. In November 2010, we decided to expand production capacity of the Ulan thermal coal mine located in New South Wales, Australia, in which we own a 10% working interest through MDP. And in March 2011, we made a decision regarding large-scale expansion of our BMA coking coal business in Queensland through MDP.

Global Crude Steel Output by Country (billion tons)
Global Crude Steel Output by Country
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BMA, the world's largest producer of hard coking coal in terms of global seaborne trade, continues to provide a stable supply to customers around the world.

Non-Ferrous Metals Division

  • Base Metals Business Unit
  • Aluminum Business Unit
  • Precious Metals Business Unit

  • Unimetals Unit
  • Non-Ferrous Metals Business Development Unit

This division has two business pillars: resources investment, and trading. In the upstream sector, we are involved in securing the key non-ferrous metals resources of copper and aluminum in various countries, including Chile, Peru, Mozambique, and Australia. In midstream and downstream sectors, we trade non-ferrous metals, raw materials and products in certain countries and regions, namely, the U.S., China, ASEAN nations including Thailand, and Europe. Prices for non-ferrous metals have risen steadily along with the general recovery in the global economy, which has been underpinned by strong economies in BRICs nations, including China, which accounts for 40% of global copper demand, in the wake of the collapse of Lehman Brothers in September 2008.

Under this global economic environment in the field of resource investments, we increased our ownership interest in the Escondida copper mine in Chile in May 2010, increasing our equity interest in production. At the Los Pelambres copper mine in Chile, production is now in full swing following the safe completion of expansion work in the previous fiscal year. At the Antamina copper mine in Peru, expansion work is currently underway with a target completion date in 2012. On the other hand, at the MOZAL aluminum smelter in Mozambique, Africa, and the BOYNE aluminum smelter in Australia, we continue to seek greater cost competitiveness and are thus running these operations in ways that achieve greater efficiency and reduce costs. In these and other ways, we are working to secure quality and stable supply sources of non-ferrous raw materials around the world to meet growing demand in industrialized nations, BRICs countries, and elsewhere.

In terms of our trading business, in April 2010, we consolidated trading of nonferrous metals, raw materials and products, except precious metals, in Mitsubishi Corporation Unimetals Ltd. This wholly owned MC subsidiary is positioned at the core of our trading business, and will thus spearhead our drive to expand business and increase earnings in this area. In the precious metals trading field, June 2010 saw several precious metals exchange traded funds listed and begin trading on the Tokyo Stock Exchange. Going forward, MC will continue working to provide speedy and sophisticated products and services that cater to various needs in the growing global market.

World Supply of Copper and Aluminum (million tons)
World Supply of Copper and Aluminum
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The Escondida mine in Chile produces more than one million tons of copper each year. It is the world's largest copper mine, with reserves for at least another 50 years of operation.

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