Mitsui Kinzoku Company, Limited

Prices of non-ferrous metals such as Zinc, Lead, and Copper are determined in international markets including the LME, and can fluctuate significantly due to international supply-demand balance, global political and economic conditions, and speculative trading. If LME prices and similar benchmarks fall significantly and remain depressed for an extended period, it could materially affect operating results through deterioration in smelting income (margin). As a countermeasure, the company hedges risk through forward commodity transactions.

Since the prices of imported raw materials such as zinc concentrate and domestic prices of non-ferrous metal ingots are determined based on US dollar-denominated LME prices, smelting income is effectively denominated in US dollars, and export income from Functional Materials and other products is also denominated in foreign currencies. If the yen appreciates significantly and this continues for an extended period, it could materially affect operating results. Hedging through forward foreign exchange transactions is conducted as necessary.

The company's products are widely used in electronic devices, automobiles, and other applications. In October 2024, a quality impropriety case at a subsidiary was discovered, leading to the establishment of a special investigation committee, which published its findings on April 4, 2025. If quality defects occur in automotive parts or similar products, there is a risk of this developing into a serious accident or large-scale recall. As recurrence prevention measures, the group is implementing surprise audits, digitization of inspection data, quality compliance education, and strengthening of quality assurance guidelines across the entire group.

If customer information or confidential information is leaked, tampered with, or lost due to cyberattacks, intentional or negligent acts by related parties, or improper use of generative AI, this could result in suspension of business activities and significant liability for damages or litigation risk. The company recognizes that new threats continue to increase due to changes in the international situation and advances in ICT technology. It addresses this through continuous strengthening of its SOC and CSIRT, compliance with ICT security regulations, and regular audits and monitoring.

The company group, which operates globally, is exposed to rising geopolitical risk, political instability, tightening trade regulations, economic sanctions, and protectionist trends. In particular, it is difficult to fully foresee the impact of additional tariff measures by major countries including the United States. This could affect business performance through a decrease in sales volume due to customer companies revising their production and investment plans, and through increased costs for product sales and raw material procurement. The company addresses this through information gathering and monitoring from the Ministry of Foreign Affairs and private think tanks, as well as diversification of the supply chain.

In the Functional Materials segment, intensifying price competition due to the emergence of competing products in China and elsewhere, loss of technological advantage and market share decline due to progress in alternative technologies, demand decline due to economic downturn, changes in import tariffs, and export regulations on rare metals could affect business performance and continuity. There is also a risk of increased costs due to stricter environmental regulations and the introduction of carbon taxes. The company works to reduce these impacts through the development of high value-added products and differentiated technologies, appropriate pricing, and diversification of procurement and sales channels.

There is a risk of operational trouble, including equipment failure, arising from continued high-load operation of equipment due to the promotion of increased processing of recycled raw materials, aging production equipment, and the processing of new raw materials. In addition, following the business reorganization of Toho Zinc, the Zinc smelting business now operates under a two-company structure comprising the company and DOWA Metals & Mining, making the maintenance of stable operation and stable supply a challenge. In addition to daily equipment maintenance, the company works to reduce operational risk through appropriate capital investment and process improvements from a medium- to long-term perspective.

The risk of large-scale natural disasters such as typhoons, concentrated heavy rains, and earthquakes is increasing worldwide due to the progression of climate change, and combined with large-scale outbreaks of infectious diseases, this could disrupt procurement, production, and sales through damage to employees, production facilities, and the supply chain. If such risks materialize, the company will activate its BCP with the highest priority on protecting human life, aiming to protect assets, maintain the supply chain, and achieve early recovery. The company continuously improves the effectiveness of its BCP measures through the Mitsui Kinzoku BCM management activity cycle.

The non-ferrous metals industry has characteristics of relatively high greenhouse gas emissions, and progress in decarbonization policies both domestically and internationally is expected to lead to the start of emissions trading systems and increased capital investment costs. The company is also required to respond to stricter regulations on water resources, waste, and biodiversity, as well as revisions to SSBJ standards and the GHG Protocol. The company is working to reduce risk through the purchase of renewable energy and CO2-free electricity, the provision of environmentally contributing products, and preparation for information disclosure based on TNFD.

If unforeseen circumstances arise due to changes in the business or external environment, the effectiveness of governance could decline, giving rise to compliance risks such as legal violations, as well as litigation and reputational risks. If misconduct such as bribery or anti-competitive behavior occurs, this could also materially affect operating results through penalties and reputational damage. The company addresses this through its transition to a company with an Audit and Supervisory Committee in June 2024, the establishment of a Compliance Committee in March 2026, and thorough dissemination of its code of conduct and compliance guidebook.