Nippon Steel and Sumitomo Metal Industries combine themselves into world top comprehensive steel maker in technology, quality and cost. Steel makers’ business environment has changed drastically in past years in competition in steel market and raw materials procurement. The makers cannot secure margin enough to sustain and expand corporate value when they are squeezed by higher raw materials cost and lower steel price. The severe condition pushed the 2 Japanese steel makers to decide the merger in around one month talk from the tops’ meeting.They expand the cooperation through alliance between 3 makers including Kobe Steel since 2002. Nippon Steel and Sumitomo Metals build the relationship in slab supply and support during production trouble especially between Nippon Steel’s Kimitsu and Nagoya works and Sumitomo Metals’ Kashima works and between Nippon Steel’s Hirohata works and Sumitomo Metals’ Wakayama works. Nippon Steel sent slab from Oita works to Kashima works during production trouble at the blast furnace in last November. The cooperation in the operations supports the merger talk. Japanese integrated steel makers’ profitability suffer from higher raw materials cost in January-March even when the production increases from October-December. The production level is around 90% of the peak due to higher export but the makers cannot secure profit even at higher production. Nippon Steel and Sumitomo Metals expect net loss in the quarter. They cannot pass higher cost on the selling price fully when the users resist the wide price increase. They try to improve the profitability through the merger by generating synergy. The combined company tries to accelerate activity in global operation. Nippon Steel’s president Shoji Muneoka and Sumitomo Metals’ president Hiroshi Tomono visited Japan Fair Trade Commission on Friday to seek the approval. They expect the commission would approve the merger when they have different specialty items each and combined domestic share is less than 50% for many items. They launch special task force to make merger plan to combine themselves in October 2012. Mr. Muneoka said at press conference on Thursday Nippon Steel and Sumitomo Metals combine each expertise to expand global operations. They will make synergy generating plan including reshuffling the operations. Mr. Tomono said they study the best plan for the new company. Mr. Muneoka said they try to make efficient plan to operate existing facilities.
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