Merger of Japanese Giants Would Create World’s No. 2 Steelmaker

Japan’s Nippon Steel Corp. and Sumitomo Metal Industries Ltd. are considering combining their two companies. A merger between the two Japanese producers would create the world’s second largest steel company with a capacity of nearly 40 million tons. Nippon Steel is currently the world’s fourth-largest steel producer with more than 30 million tons of capacity.

The two companies, Japan’s first and third largest steelmakers, initially entered an alliance in 2002, which strengthened their mutual supply of semi-finished products and allowed for some consolidation of their subsidiaries. But “confronted with the changes in the business environment surrounding the steel industry, the companies have come to share the understanding that it is crucial to further strengthen their mutual relationship,” a release from Nippon Steel says.

According to the release, the companies are considering the merger to support their efforts to supply growing steel demand in emerging markets, to enhance their ability to improve the quality of their steel products and to better position themselves to procure raw materials.

The two companies hope to execute a merger agreement by April, to be finalized by Oct. 1.