Top > Business > 2006 > December > 2006-12-10

Leading Steel Manufactures in China and Japan May Merge

Japanese Nippon Steel Corp., the world`s second-largest steelmaker, said Monday it is contemplating cooperation with China`s largest steel manufacturer, Baosteel Group Corp., due to increased competition and consolidation in the industry. The Steel industry has been teeming with hostile takeovers, cross-shareholding deals and other forms of consolidations in the past few years.

Baosteel Chairwoman, Xie Qihua, said Nipon Steel and the North Korean POSCO should consider buying stock from the steel producing Chinese giant. Nippon Steel President, Akio Mimura, confirmed he was approached by Baosteel and that the company needed to check how this project could contribute to his company?s profitability. Since Mittal Steel and Arcelor merged this year, Nippon Steel became the world`s second largest steel manufacturer in the world. Nippon already has a strategic alliance with POSCO. In 2003, Baosteel, Nippon Steel and Arcelor opened a joint steel plant in Shanghai.

Nippon Steel is becoming more and more involved in specialized steel manufacture, with products like steel sheets for the automotive industry, while Baosteel and other Chinese companies mass-produce steel for general use. The combined steel output of Nippon, Baosteel and POSCO is 90 million tons annually, as apposed to 110 million tons produced by Arcelor-Mittal. Baosteel is government owned and its chairwoman said it refused Mettal Steel`s offers for corporate cooperation. Steel manufacturers have been bolstering cross-shareholdings in an effort to protecting themselves against hostile takeover attempts. A hostile bid in Japan seems a possible because of a decline in cross-shareholdings among the country`s companies, the emergence of corporate raiders and a move towards industry consolidation.