Nippon Steel and Sumitomo Metal Industries decided to mull amalgamation. Both companies’ hot coil output capacity totals above 30 million tonnes per year. Nippon Steel produces steel sheet in Yahata, Hirohata, Nagoya, Kimitsu and Oita iron works. Sumitomo Metals produces steel sheet in Kashima and Wakayama iron works. Wakayama iron works doesn’t have hot rolling mill while operates cold rolling mill and hot-dip galvanizing line.In fiscal 2009, two companies’ market share totaled 51.5% for hot rolled sheet, 53.1% for pickled steel sheet, 46.5% for cold rolled sheet, 46.6% for electrogalvanized steel sheet and 41.9% for hot dipped galvanizing steel sheet. Both companies stand on strong market position for automotive steel sheet and their domestic market share reaches 50%. As for magnetic steel sheet, their domestic market shares would approach 70%. Meanwhile, their electrogalvanizing and hot-dip galvanizing lines should be reorganized due to shrinking domestic demand along the end users’ operation shift to overseas. At overseas, Nippon Steel has steel sheet production bases in China, Thailand, USA and Brazil, and plans to open new sites in Mexico and India. Nippon Steel invests in re-rollers in Africa, Vietnam, Indonesia, Malaysia, Thailand and China. Sumitomo Metals operates a cold rolling mill in Vietnam and provides technical support to Bhushan Steel of India. Geological overlap is small except for Southeast Asia. Thus synergies are expected. Nippon Steel produces H-beam in Kimitsu and Sakai iron works. Electric furnace steel makers of Nippon Steel’s group, Godo Steel has production base of H-beam in Osaka and Topy Kogyo in Toyohashi. Sumikin Steel has production bases in Kashima and Wakayama iron works. They can improve H-beam productivity by item reshuffle among these bases. Nippon Steel group’s domestic H-beam share was 33.9% in fiscal 2009 while Sumikin Steel was 15.4%. They would have strong presence in domestic H-beam market after the business integration. H-beam demand has almost halved since the peak in fiscal 1995 to fiscal 2009. Nippon Steel and Sumitomo Metals’ integration may lead to optimization of domestic surplus capacities and initiate drastic integration of the players.
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