鉄鋼再編 国際競争激化が促した大合併

The Yomiuri Shimbun (Feb. 6, 2011)
Merger of steelmakers prompted by global race
鉄鋼再編 国際競争激化が促した大合併(2月5日付・読売社説)

A gigantic steelmaker will be born in Japan with the aim of surviving fierce competition from foreign rivals.

Nippon Steel Corp. and Sumitomo Metal Industries Ltd.--Japan's largest and third-largest steelmakers, respectively--agreed to merge by October 2012. Though they started capital and business tie-ups in 2002, the two companies have decided this time to also integrate management.

Their combined annual production of crude steel will become the biggest in Asia and second biggest in the world after ArcelorMittal, headquartered in Luxembourg.

Not only the steel industry, but also other industrial sectors in Japan are characterized by tough competition among several major companies. Japanese companies are engaged in a domestic war of attrition, and it is often noted they have become too exhausted to do battle against business giants in other countries. We expect this latest large corporate realignment to affect other industries and to lead to strengthening the competitive edge of Japanese companies in general.


Race on for new markets

The merger of Nippon Steel and Sumitomo Metal was prompted by intensified competition in markets of newly emerging economies such as China and India.

Nippon Steel has an advantage in manufacturing high-function steel sheets for automobiles and electric appliances, while Sumitomo Metal excels in making seamless pipes. But the domestic market for such products is shrinking. On the other hand, the global market, including markets in up-and-coming countries with booming economies, is growing rapidly.

ArcelorMittal is aggressively pursuing mergers and acquisitions, while Chinese and South Korean steelmakers have launched offensives by increasing output. In reality, Japanese makers have been forced to play defense.

Japanese automakers and electronic appliance manufacturers, which consume a huge amount of steel, are quickly increasing local production in newly emerging economies. Japanese steelmakers will fail to serve such customer needs if they cannot expand production in those countries.

To deal with this problem, the merged companies aim to build factories and strengthen their production capability in newly emerging economies with a reinforced management base.


Resource prices merger factor

The steel industry also feels threatened by soaring resource prices with the emergence of resource giants that produce and sell iron ore and other raw materials. Nippon Steel and Sumitomo Metal apparently expect their larger size will reinforce their bargaining power on resource prices.

With the merger, the two firms are highly likely to trim their operations by taking actions such as eliminating and consolidating their blast furnaces. At the same time, it is extremely important to maintain employment in Japan. Hollowing out of the domestic labor force should be avoided as much as possible.

Now, attention will turn to scrutiny of the merger by the Fair Trade Commission, which will decide whether to approve the deal or not.

The new company created by the merger would make up nearly 45 percent of the crude steel produced in Japan. However, its share in the global market would be just 3 percent.

The FTC tends to emphasize domestic share, but it should approve the merger as soon as possible from the viewpoint of enhancing the international competitiveness of the Japanese steel industry.

(From The Yomiuri Shimbun, Feb. 5, 2011)
(2011年2月5日01時21分 読売新聞)

by kiyoshimat | 2011-02-06 08:10 | 英字新聞

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