Approval Granted to Nippon Steel, Sumitomo Metal Merger

---

Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--In February, Nippon Steel Corporation (TYO:5401) (Tokyo) and Sumitomo Metal Industries Limited (TYO:5405) (Osaka) announced their joint decision to merge and become the second largest steel company in the world. The Japanese steel industry had been suffering from the lingering effects of the 2008 world economic crisis, and its situation was amplified following the Great East Japan Earthquake.

On December 14, the Japan Fair Trade Commission granted the companies approval to merge. Though the merger will not take place until October of next year, the process of approval for the new entity, Nippon Steel & Sumitomo Metal Corporation, took place quickly. With the state of the industry and Japan's economy, the commission did not want to prolong the process.

Nippon Steel & Sumitomo Metal Corporation plans to advance itself in other areas of Asia, including Southeast Asia, India and China, as well as in Brazil. As of now, the separate companies account for approximately 45% of Japan's market, while they account for less than 5% of global crude output. Nippon Steel is now the sixth largest steel company in the world, though it was ranked as the second largest in 2009.

Nippon Steel has made significant strides in the past few years to increase its presence in Southeast Asia, though it does not currently operate any blast furnaces in the region or outside of Japan. Sumitomo does not operate any blast furnaces outside of Japan either. Nippon Steel currently operates several end product steel plants in Southeast Asia, including rolling mills and galvanizing mills.

The merger is a push in the right direction however, since domestic demand remains low. Though no plans for blast furnaces outside of Japan have been confirmed for Nippon Steel & Sumitomo Metal Corporation, the decision to do so is probably inevitable since the costs of building an in-country blast furnace are less than export costs. Many Japanese automobile makers are increasing their presence abroad, and Japanese steel makers are following suit. The merger will help increase global competitiveness and will save costs for future plants and production.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.