Japanese steel giants to merge

Nippon Steel Corp. and Sumitomo Metal Industries announced that they agreed to commence consideration of the merger of their entire businesses, which will make both companies become the second largest steel company in the world, next to ArcelorMittal.

Based on Sumitomo’s market value and net debt, the deal would be worth more than ￥2 trillion ($24.5 billion). The proposed merger between Sumitomo Metal Industries and Nippon Steel will create synergies for both companies as well as benefit “the wider steel industry by helping to increase pricing and margins.“The purpose of this merger is to fend off competition from rivals in China, South Korea and India,” said Takashi Murata, an analyst at Daiwa Securities Capital Markets Co. in Tokyo. A bigger company has more clout to negotiate raw-material costs and set steel prices for buyers including automakers, he said.