Business risks and other risks

Matters related to the status of the Groups businesses and financial position that could
have a significant impact on investors decisions are discussed below. As of the end of
FY2012 (March 31, 2012), statements about the future are based on the judgment of
Nippon Steel Corporation and Sumitomo Metal Industries.

(1) Fluctuations in the demand for and supply of steel

The majority of the Groups sales come from the steel manufacturing business, and
fluctuations in the international demand for or supply of steel could have an impact on
earnings. In addition, at a time of fierce competition with competitors such as Japanese
and foreign steel manufacturers, any changes in the Groups competitiveness in terms
of technology, cost, quality, or other aspects could have an impact on earnings.

Many customers of the companys steel manufacturing business regularly purchase

large volumes of steel assuming that they will process the steel into products, which
they will then sell, or do something else with the steel. Changes in the purchasing
policies of major customers could have an impact on earnings.

There are credit risks associated with parties such as trading companies and customers
who purchase the companys steel and other products. A default by one of these parties
could have an impact on earnings.

(2) Fluctuations in the prices of raw materials and fuels

The prices of raw materials (such as iron ore, coal, alloys, and scrap), the price of raw
fuels that are mainly used in the steel manufacturing business, and sea transport costs
are linked to the international demand for and supply of resources. In the future, major
fluctuations could occur in these prices due to shifts in the demand for or supply of raw
materials for steel, which reflect factors such as economic conditions and steel
production.

(3) Fluctuations in the interest rates of financial

instruments (including bonds) and other fluctuations in
financial markets
Interest rate conditions and fluctuations in financial markets could have an impact on
earnings.

(4) Fluctuations in the value of assets held, such as

marketable securities (including pension assets)
The Group could have to record valuation losses on investment securities because of
weak earnings by companies invested in or declines in securities markets. In addition to
marketable securities, the company has pension assets, including employee retirement
benefit trust assets, and fluctuations in interest rates and the prices of financial
products (such as Japanese and overseas stocks and bonds that form the pension
assets) could have an impact on earnings.

(5) Fluctuations in foreign exchange markets

Many of the Groups business transactions, including exporting items such as products
and importing items such as raw materials, are denominated in foreign currencies. The
Group also holds bonds and stocks denominated in foreign currencies. Therefore,
fluctuations in foreign exchange markets could have an impact on earnings.

(6) Environmental regulations related to business

activities
If regulations on the allowable amount of CO2 emissions or other environmental
regulations are strengthened or introduced in Japan, this could have an impact on
earnings due to constraints on the Groups business activities, particularly the steel
business.

(7) Higher duties and import restrictions in major overseas

markets
The U.S. and other countries have imposed anti-dumping duties on some of the Groups
steel exports. If duties are raised, or if special duties (such as anti-dumping duties or
other import restrictions, such as restrictions on amounts) are imposed in the future,
earnings could be impacted due to constraints on exports.

(8) Major disasters, accidents, lawsuits, etc.

If a major typhoon, earthquake, or other natural disaster were to hit one of the Groups
business sites (steel plant, etc.) or customers, or if a contagious disease, such as new
strain of influenza, were to suddenly spread throughout Japan, earnings could be
impacted due to constraints on business activities. In addition, if a major work-related
accident, equipment-related accident, environmental accident, quality problem, or
similar incident were to occur, or if an unfavorable judgment were made against the
company in a major lawsuit, earnings could be impacted due to suspension or
constraints on business activities, compensation, or other reasons.