Nippon Steel Corp. and Sumitomo Metal Agree to Merger by USD9.5 Billion

2011-10-03

After months of negotiations, Japan Steel giant Nippon Steel Corp. agreed to merger with the third-largest steel producer in Japan, Sumitomo Metal Industries, Ltd., by Japanese 726.5 billion yen (USD9.5 billion), the merger decision will create the second-largest steel producer in the world, after India ArcelorMittal.
The main merger goal of the two large Japan steel makers is to increase the bargaining chips with raw material suppliers such as the leading mining company Broken Hill Proprietary Billiton, Ltd. (BHP) to reduce cost, and also to strengthen competitiveness to fight with oversea opponents such as China Baosteel Group and South Korea Pohang Iron And Steel Co., Ltd. 
The post-merger company will be called Nippon Steel & Sumitomo Metal Corp., which is expected to save 150 billion yen annually at the fourth year after the merger. The new company will gain the market share in the emerged markets and its annual production will reach 70 million tons in ten years. Based on the data of WSA, the gross output of the two companies last year was 48.3 million tons.