Nippon Steel, Sumitomo Metals to Merge Construction Materials Units

Nippon Steel and Sumitomo Metal Industries announced on Tuesday they reached basic agreement to start study for integration of the construction materials making subsidiaries. They seek 2 way mergers between Nittetsu Steel Sheet Corporation and structural steel sheet business of Sumitomo Metal Steel Products and between Nippon Steel Metal Products and road and civil engineering materials business of Sumitomo Metal Steel Products. They try to sign merger agreement in May starting new firms in October. The integrated firms will be top domestic makers in each area. The partners combine the sheet processing business for the first time. They agreed to integrate Nittetsu Steel Sheet and structural steel sheet business of Sumitomo Metal Steel Products in order to utilize the production capacity efficiently. Nittetsu Steel Sheet produces galvanizing steel at Funabashi, Chiba and Aamagasaki, Hyogo while Sumitomo Metal Steel Products produces galvanizing sheet at Sakai, Osaka. They also try to integrate Nippon Steel Metal Products and road and civil engineering materials business of Sumitomo Metal Steel Products. They study potential shutdown of some facilities to make guardrail and sheet piling. Nippon Steel Metal Products makes those products at Nogi, Tochigi and Takaishi, Osaka while Sumitomo Metal Steel Products produces them at Amagasaki. Nippon Steel and Sumitomo Metals launch committee for the integration to discuss the issues. They try to improve the efficiency of production and sales network for the businesses improving profitability and competitiveness. The structural steel sheet market has potential risk of oversupply caused by expansion in China though the Japanese market has still firm demand. The lower expenditure for public works is expected to reduce demand and profit for domestic road and civil engineering materials business. Under the expectation, the partners decided to seek better business structure. Nippon Steel and Sumitomo Metals already combined some businesses establishing welding materials making firm, Nippon Steel & Sumikin Welding in 2002, stainless making firm and Nippon Steel & Sumikin Stainless Steel in 2003 and they will start steel rolling roll maker, Nippon Steel & Sumikin Rolls in April 2006.