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159021
Sat, 02/05/2011 - 17:35
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https://www.oananews.org//node/159021
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FOCUS: Japanese steelmakers once again seek to lead global market
TOKYO, Feb. 5 Kyodo - Once a global leader in the steel industry, Nippon Steel Corp. is trying to restore its position by teaming up with another Japanese steelmaker when market conditions are rapidly changing.
The announcement of the plan by Nippon Steel and Sumitomo Metal Industries Co. to merge by Oct. 1 next year comes at a time when raw material prices are climbing and large Asian steelmakers have begun to emerge.
''We won't settle for the current status, and we'll challenge the global market,'' Nippon Steel President Shoji Muneoka said at a news conference Thursday. ''It's the best choice, which would contribute to simulating the global economy.''
If Japan's biggest and No. 3 steelmakers merge, they will become the world's second-largest steelmaker in terms of crude steel production capacity after ArcelorMittal based in Luxemburg, the two companies said.
Nippon Steel has been one of the world's leading steelmakers since it was created in a merger between Yahata Steel and Fuji Steel in 1970.
But its ranking has gradually slipped, falling to sixth place in 2009 from second place in 2008 in global crude production rankings, according to a report last June by Britain's Metal Bulletin.
''In the steel industry, raw materials such as iron ore are monopolized by major resources companies, and (steelmakers) can't survive in the global market unless they enhance price competitiveness through scale expansion,'' said Mitsumaru Kumagai, chief economist at the Daiwa Institute of Research.
Japanese Economy, Trade and Industry Minister Banri Kaieda welcomed the announcement, saying the planned merger will serve as a ''pioneer case'' of creating a company that can ''fight in the world.''
But whether the planned merger will prove successful is still unclear, although the new company will overwhelm other Japanese steelmakers with annual crude steel production of about 50 million tons.
Even after the merger, it appears difficult for the new company to catch up with the world's leading steelmaker AcelorMittal, which has annual crude steel production of about 100 million tons.
Moreover, competition with Asian rivals, such as China's Baosteel Group Corp. and South Korea's Posco, will be more fierce, as several steelmakers with crude steel output capacity of about 50 million tons are expected to emerge in China, where the government leads realignment.
While Japan's steelmakers have placed more emphasis on making profits through advanced technology rather than seeking scale expansion, Chinese and South Korean rivals have succeeded in drawing demand from emerging markets by focusing on low and middle-class steel.
The contrasting moves between Japanese steelmakers and Asian rivals have prompted some experts to point out that the Japanese firms fail to accommodate the fast-growing markets, which value prices.
The new company also has to face tough price negotiations with major coal and mining companies in Brazil and Australia to purchase ingredients for steel.
One aim of the merger is certainly acquiring advantage in such negotiations, but influence of the new company is expected to be limited as its output scale falls far behind that of AcelorMettal, experts say.
Following the two Japanese steelmakers' announcement, the focus now shifts to whether Japan's antitrust watchdog will approve the planned merger.
While the global market share of the new company will be only 3 percent, the domestic share will exceed 40 percent, which could become a hurdle for the steelmakers to win approval from the Japan Fair Trade Commission.
But Nippon Steel President Muneoka expressed confidence, saying at the news conference, ''We believe we can obtain full understanding.''
Muneoka's optimistic view is seen to reflect such background as that the two companies have expertise in different fields, with Nippon Steel excelling in magnetic steel sheet and railway rails, and Sumitomo Metal having advantage in seamless pipes.
The commission, which is seen by the business community to value domestic share, compiled in 2007 a guideline to examine mergers based on global share, which could be a tailwind for Japanese companies seeking mergers.
Kumagai of the Daiwa Institute of Research says Japan should review the antitrust law as it mainly places emphasis on domestic market share, saying the law cannot respond to changes on a global scale in the competitive environment.
''While the South Korean industry dramatically increases global competitiveness by conducting thorough selection, Japan lags behind,'' Kumagai said.
''As (Japanese companies) are wearing out their strength due to excessive domestic competition, it will be difficult for them to win in the global race unless realignment progresses further,'' he said.
An industry ministry official said, ''(The merger) is a resolute decision. It will be the litmus test for whether a big alignment occurs in Japan in the future.''
The announcement of the plan by Nippon Steel and Sumitomo Metal Industries Co. to merge by Oct. 1 next year comes at a time when raw material prices are climbing and large Asian steelmakers have begun to emerge.
''We won't settle for the current status, and we'll challenge the global market,'' Nippon Steel President Shoji Muneoka said at a news conference Thursday. ''It's the best choice, which would contribute to simulating the global economy.''
If Japan's biggest and No. 3 steelmakers merge, they will become the world's second-largest steelmaker in terms of crude steel production capacity after ArcelorMittal based in Luxemburg, the two companies said.
Nippon Steel has been one of the world's leading steelmakers since it was created in a merger between Yahata Steel and Fuji Steel in 1970.
But its ranking has gradually slipped, falling to sixth place in 2009 from second place in 2008 in global crude production rankings, according to a report last June by Britain's Metal Bulletin.
''In the steel industry, raw materials such as iron ore are monopolized by major resources companies, and (steelmakers) can't survive in the global market unless they enhance price competitiveness through scale expansion,'' said Mitsumaru Kumagai, chief economist at the Daiwa Institute of Research.
Japanese Economy, Trade and Industry Minister Banri Kaieda welcomed the announcement, saying the planned merger will serve as a ''pioneer case'' of creating a company that can ''fight in the world.''
But whether the planned merger will prove successful is still unclear, although the new company will overwhelm other Japanese steelmakers with annual crude steel production of about 50 million tons.
Even after the merger, it appears difficult for the new company to catch up with the world's leading steelmaker AcelorMittal, which has annual crude steel production of about 100 million tons.
Moreover, competition with Asian rivals, such as China's Baosteel Group Corp. and South Korea's Posco, will be more fierce, as several steelmakers with crude steel output capacity of about 50 million tons are expected to emerge in China, where the government leads realignment.
While Japan's steelmakers have placed more emphasis on making profits through advanced technology rather than seeking scale expansion, Chinese and South Korean rivals have succeeded in drawing demand from emerging markets by focusing on low and middle-class steel.
The contrasting moves between Japanese steelmakers and Asian rivals have prompted some experts to point out that the Japanese firms fail to accommodate the fast-growing markets, which value prices.
The new company also has to face tough price negotiations with major coal and mining companies in Brazil and Australia to purchase ingredients for steel.
One aim of the merger is certainly acquiring advantage in such negotiations, but influence of the new company is expected to be limited as its output scale falls far behind that of AcelorMettal, experts say.
Following the two Japanese steelmakers' announcement, the focus now shifts to whether Japan's antitrust watchdog will approve the planned merger.
While the global market share of the new company will be only 3 percent, the domestic share will exceed 40 percent, which could become a hurdle for the steelmakers to win approval from the Japan Fair Trade Commission.
But Nippon Steel President Muneoka expressed confidence, saying at the news conference, ''We believe we can obtain full understanding.''
Muneoka's optimistic view is seen to reflect such background as that the two companies have expertise in different fields, with Nippon Steel excelling in magnetic steel sheet and railway rails, and Sumitomo Metal having advantage in seamless pipes.
The commission, which is seen by the business community to value domestic share, compiled in 2007 a guideline to examine mergers based on global share, which could be a tailwind for Japanese companies seeking mergers.
Kumagai of the Daiwa Institute of Research says Japan should review the antitrust law as it mainly places emphasis on domestic market share, saying the law cannot respond to changes on a global scale in the competitive environment.
''While the South Korean industry dramatically increases global competitiveness by conducting thorough selection, Japan lags behind,'' Kumagai said.
''As (Japanese companies) are wearing out their strength due to excessive domestic competition, it will be difficult for them to win in the global race unless realignment progresses further,'' he said.
An industry ministry official said, ''(The merger) is a resolute decision. It will be the litmus test for whether a big alignment occurs in Japan in the future.''
