Japan's Nippon Steel, Sumitomo Metal To Merge Stainless Operations

Companies merge to strengthen competitiveness.

Two major Japanese steelmakers, Nippon Steel Corp. and Sumitomo Metal Industries Ltd., agreed Thursday to merge their stainless steel businesses to strengthen competitiveness.

 

The move was widely expected as both Nippon Steel and Sumitomo Metal said earlier this year they were working toward a stainless steel business alliance.

 

Under the basic agreement signed by Nippon Steel and Sumitomo Metal, the companies will sign an official agreement to integrate operations by the end of September, according to a press release.

 

Nippon Steel spokeswoman Yoshiko Shin said many details have yet to be worked out, including whether a new company would be formed and what stakes the parent firms may take in a new entity.

 

The planned merger is intended to enhance their competitiveness in stainless steel, which is widely used in automobiles, construction materials and shipbuilding, Shin said.

 

Their combined stainless steel production would total about 1 million tons a year, one-third of Japan's annual output, she said.

 

Pressure is high on steelmakers to cut costs amid falling steel prices, while the world's steel industry undergoes realignment for more efficiency in a global market.

 

Last year, Nippon Steel announced an alliance with Kobe Steel Ltd. of Japan, and competitors Kawasaki Steel Corp. and NKK Corp. plan to merge under a holding company in October.

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