Nippon Steel and Sumitomo Metal Plan Merger

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Researched by Industrial Info Resources (Sugar Land, Texas)--On Thursday, February 3, Nippon Steel Corporation (TYO:5401) (Tokyo) and Sumitomo Metal Industries Limited (TYO:5405) (Osaka, Japan) signed agreements to merge in 2012, representing the first Japanese steel industry consolidation in more than a decade. The No. 1 and No. 3 steel companies in Japan will join to form the world's second-largest crude steel producer under a new name that has yet to be decided.

Raw materials costs and weak competition caused by an over-appreciated yen were the primary drivers for the merger. There has been has been no word on how the merger will affect projects booked by either company as of yet. The two companies may invite Kobe Steel Limited (TYO:5406) (Kobe, Japan) to join in the merger.

Nippon Steel seems to be going through a renovation phase, hoping to get a jump on economic recovery that has been slow to build in Japan. Between this year and 2013, the company has several expansions and additions that are being tracked by IIR on the books both in Japan and abroad. Nippon steel is also planning a blast furnace rebuild at its Kimitsu works in the Chiba prefecture. The $465 million rebuild is scheduled to commence in the first quarter of 2012, and Nippon Steel is expecting completion by the end of 2012.

In India, Nippon Steel is hoping to complete a steel pipe plant and its subsequent expansion by the end of 2013. The total investment value for both projects, which will be directed at motor vehicles, is estimated at $36 million. When complete, the pipe plant, which will be located in the state of Rajasthan, will have a capacity of 240,000 tons per year. In Japan, Nippon Steel will focus not only on the Kimitsu blast furnace rebuild, but also on expanding facilities at its Tokai works in Aichi prefecture. Later in the year, construction on a coke furnace expansion and dry quenching system addition is scheduled to commence. Completion of the $706 million project is anticipated early in 2013.

Sumitomo Metal is currently preparing for the construction of a steel sheet mill in Vietnam in association with China Steel Corporation (Taipei). The $1.15 billion mill is expected to be completed early next year and will have a capacity of 1.6 million tons per year. For more information, see January 4, 2011, article - Japan Steel Venture to Set up $1.7 Million Ton Plant in Vietnam.

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