Nippon Steel, Sumitomo Metal to formally merge tomorrow

Japan's two major steelmakers Nippon Steel and Sumitomo Metal Industries are set to formally merge tomorrow, forming the world's second largest steel producer with a combined capacity of 46.1 million tonnes.

Earlier this month, the two companies had announced an agreement to integrate and reorganise their business operations on the scheduled date of April 1, 2013.

Nippon Steel & Sumikin Logistics, the planned name of the integrated company, will be wholly owned by Nippon Steel and Sumitomo Metal Corporation.

The integration process is set to begin tomorrow.

"The new company aims to realise integration synergies quickly and become an efficient, profitable and competitive logistics company," the two companies had said.

The joint entity between world's sixth-largest Nippon Steel and 27th-ranked Sumitomo will replace Hebei Group, which has a production of 44.4 million tonnes, according to data available from World Steel Association.

Japan is the second largest steel producer in the world with 107.6 million tonnes.

The merger, aimed at reducing cost of operations, will have a major role in determining the global steel market and price.

Global steel production stood at 1,527 million tonnes in 2011. NRI billionaire L N Mittal-led ArcelorMittal contributed the maximum at 97.2 million tonnes to the overall global production.

Industry sources said the entity will try to export more to India, where the demand for steel is growing.

Japanese steel mills have, in the recent past, stepped up exports to the Indian market cashing on the Free Trade Agreement signed between the two countries. This may exert further pressure on the Indian steel makers to maintain prices.