Nippon Steel buys its rival Nisshin Steel

Japan's largest steelmaker, Nippon Steel & Sumitomo Metal, announced today that it is looking to acquire its rival and fourth in the sector, Nisshin Steel. This acquisition will give the company control over about half of the domestic market.

Nippon Steel is already the majority shareholder of Nisshin Steel with a stake of about 8 percent and expects to receive approximately 51 to 66 percent of the company in order to establish its subsidiary in March 2017.

Nippon Steel, the second largest steel producer after global leader ArcelorMittal, has not disclosed the amount it intends to pay for the acquisition, but it wants to seriously strengthen its steel business, it said in a statement. Following the planned merger, Japan's national metallurgy will be comprised of the three large steel companies Nippon Steel & Sumitomo Metal, JFE Holdings and Kobe Steel.

Mergers in the Japanese steel sector have taken place in recent years in an attempt by domestic enterprises to keep pace with the global consolidation of companies in the metals sector. In 2002, Kawasaki Steel merged with NKK to form JFE Holdings; while in 2012 Nippon Steel Sumitomo Metal Industries was joined by Nisshin Steel and Nippon Metal Industry to form NISSHIN Steel Holdings in partnership.

This new operation by Nippon Steel & Sumitomo Metal is another step in tackling intense global competition forcing steelmakers to reduce costs amid falling steel prices and falling demand generated by slower growth in China and other emerging economies.