Japan’s biggest steelmaker, Nippon Steel, will form a joint-venture with Sumitomo Metal Industries, its third-ranked rival on the domestic market, to create world’s second largest steel giant, in an attempt to outpace their Chinese and South Korean rivals.
The merged company is formed “in response to increasing world-wide demand for steel and the local procurement needs of Japanese steel consumers operating overseas”, according to a joint press statement.
The new company, second only to India’s ArcelorMittal, is created at a difficult time for the Japanese steel industry.
It is “not a very good environment”, commented Hiroshi Tomono, Sumitomo Metal president, quoted by the Japanese press. “We have an overwhelming advantage in terms of quality, but (production) costs are our problem,” he said.
The Japanese firm would do well at the top end of the market, but would face difficulties competing with the lower cost bases of other Asian steelmakers, said a top official of Nippon Steel.
“We have a significant competitive edge in terms of highly-functional steel products, but Chinese and South Korean steelmakers are catching up with us in terms of middle-level steel products,” the unnamed official was quoted as saying.