Japan's two major steel companies merge to create the world's largest steel companies

Japan's two major steel companies, Nippon Steel and Sumitomo Metal Industries, announced the start of the merger negotiations during the Spring Festival, and plans to complete the merger in October next year. The merger of the two giants may create a new world’s second largest steel manufacturer.

Nippon Steel and Sumitomo Metal are the first and third steel companies in Japan. In 2010, the total output of crude steel from the two steel companies totaled 48.89 million tons. According to the 2009 ranking of global steel company crude steel production announced by the International Steel Association, if the two companies are merged, their output will exceed Baosteel, China’s largest steel company, and POSCO, the largest steel company in South Korea, just behind the world’s largest steel company, Ansai. Le Mittal Steel Group, ArcelorMittal production in 2009 was 77.5 million tons.

Industry analysts believe that if the two companies can effectively achieve substantive consolidation, they will have more say in the price negotiations of raw materials such as iron ore and coking coal.