Nippon Steel, Sumitomo Metal to merge

Japan's Nippon Steel and Sumitomo Metal on Thursday announced plans to merge business operations in a bid to fend off tough competition from Asian rivals amidst shrinking demand from domestic automakers.

The merger would create the world's second-largest steelmaker with a combined production of 37.5 million tonnes and combined revenue of 4.774 trillion yen ($58.54 billion) in 2009.

The merged company would be a distant second to world's No 1 steelmaker Arcelor Mittal, which has an annual production capacity of 77.5 million tonnes.

Nippon Steel and Sumitomo Metal already have a number of tie-ups as well as minority crossholdings. Nippon Steel, however, is the current market leader. It also leads Sumitomo in profitability and market capitalisation.

Nippon Steel forecasts profit of 95 billion yen for this fiscal year, against a loss of 11.53 billion yen last year. Sumitomo Metal expects current year profit to be around 60 billion yen against a loss of 49.77 billion yen last fiscal.

The business integration will help accelerate their global strategies and realise a level of competitiveness  - in technology, quality, and cost - by combining their respective resources as also generate synergies through consolidation of the superiority area in their respective businesses, Nippon Steel said in a release.