Nippon Steel, Sumitomo Metal and Kobe in deeper ties

31 Mar, 2005

Japanese steel makers Nippon Steel Corp, Sumitomo Metal Industries Ltd and Kobe Steel Ltd expanded their business alliance on Wednesday, and said they will also consider additional cross-shareholdings in each other. The three firms did not specify when or how they will strengthen the alliance through bigger cross-shareholdings. At present, the three hold minority stakes of between 1.5 and 2.6 percent in each other.
"Looking at industry realignment in Europe, we want to study (how best to form capital alliances) so that we cannot be said to be unprepared," Sumitomo Metal President Hiroshi Shimozuma told a joint news conference with the presidents of the other two firms.
The presidents played down the possibility of the alliance leading to an outright merger of the three.
The three had formed a capital tie-up in November 2002, the first step in what analysts have said could be a realignment of Japan's steel industry into two large groups.
Under the deal announced on Wednesday, Nippon Steel will inject 3.4 billion yen ($31.68 million) to take a 10 percent stake in a Sumitomo Metal's steel-making joint venture with Taiwan's China Steel Corp and Japanese trading house Sumitomo Corp.
Kobe also plans to take a 2 percent stake in the Tokyo-based venture, East Asia United Steel, by injecting 700 million yen.
The deal will enable the venture's plant in Wakayama, western Japan, to supply up to a combined 1 million tonnes of half-finished steel products to Nippon and Kobe annually within five years.
The plant now has the capacity to produce about 4 million tonnes of half-finished steel products, said a Sumitomo Metal spokesman.
Shares in Nippon Steel fell 2.95 percent to 263 yen, while Sumitomo Metal slid 1.58 percent to 187 yen. Kobe Steel fell 2.13 percent to 184 yen.
That compared with a 1.98 percent fall in Tokyo's metal and steel sector sub-index ISTEL.on the day.

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