Nippon Steel and Sumitomo Metal Industries have signed a letter of intent for the integration of their stainless steel businesses. This is two and a half years after they first announced collaboration and entered into a ten-year accord to rationalise production. An agreement is expected to be signed in September with full implementation in April 2003, or earlier. This will almost certainly result in the closure of some manufacturing units.
This pact may be the catalyst for further restructuring in the industry. Over the past few years, the stainless steel mills have attempted a whole range of alliances in their efforts to cut costs. These have clearly been insufficient to bring the companies back to satisfactory operational performances. Further full-scale mergers may now develop over the coming years.
The Japanese stainless-steel sector has made a first step towards rationalisation. The industry has been languishing in a cycle of low profitability and declining output during the past eight years. Over the same time horizon, regional steelmakers in South Korea and Taiwan have doubled their production – fuelled by an increase in demand in China from 0.5 to 1.7 million tonnes per year.
