Japan’s Two Largest Steelmakers Set To Merge By 2012

Japan’s biggest steelmaker Nippon Steel and third-ranked rival Sumitomo Metal Industries said they would work toward a merger that would create the world’s second-largest steel firm. The merger, which they plan to achieve by 2012, would create a steel giant, second only to India’s ArcelorMittal, according to Industry Week.

“It will be quite a huge task to undertake this. We are determined to make our utmost efforts,” said Sumitomo Metal Industries president Hiroshi Tomono.

A merger of the two firms, which formed an alliance in 2002, would be the first in the Japanese steel industry since the creation of the country’s number two firm JFE Holdings around a decade ago.

Global competition in the steel industry has intensified in recent years with demand spurred by emerging economies, such as China, that are undertaking massive construction, infrastructure and manufacturing projects. In addition to combining manufacturing sites, sales operations and research units, the improved capacity of the merged entity should be able to better meet the fast-changing needs of customers, the companies said.

Nippon Steel expects sales of 4.1 trillion yen (USD$50 billion) and to produce 34 million tons of crude steel in the year, while Sumitomo Metal expects sales of 1,500 billion yen (USD$18 billion) with 13 million tons. ◆