Sumitomo Metals, Nippon Steel and Kobe Steel Form Second Japanese Steel Alliance

Following hot on the heels of the joint agreement signed by Japan’s Kawasaki Steel and NKK in September, Japan’s other steel giants Nippon Steel, Sumitomo Metals and Kobe Steel have formed an alliance.

The alliance involves mutual shareholding. To this end, Nippon Steel and Kobe Steel have signed an agreement that will see both parties hold approximately 3,000 million Yen’s worth of stock in each other. Sumitomo Metals and Kobe Steel have signed a similar agreement. This effectively divides the Japanese steel industry in two.

The three companies have each signed bilateral agreements with the other two companies concerning bipartite collaboration. Consequently, they have set up a joint study committee to look at areas where they can all improve business efficiencies, pursuant to the agreements.

Each of the parties involved intend to keep competing against one another while collaboration is being studied and implemented. The alliance has been estimated to save them some where of the order of 50 billion yen a year.

To date Nippon Steel and Kobe Steel have been studying and implementing mutually beneficial measures such as the joint supply of semi-finished product to Nakayama Steel Works, as well as jointly improving transportation of steel products and the procurement of raw materials, machinery and other materials as well as other areas of co-operation between the two organisations.

At the same time Sumitomo Metal and Kobe Steel have agreed to have Kobe Steel co-operate in the supply of hot rolled steel sheet and hot rolled titanium sheet to Sumitomo. This agreement was designed to compensate for reduced production when Sumitomo closes it Wakayama facility, at the end of the 2004 fiscal year. Nippon Steel will also supply some of the shortfall.

Nippon Steel and Sumitomo Metal also plan to integrate their respective stainless steel businesses . This was originally scheduled for April 2003, but has been put back to October 2003. A definitive agreement has not yet been reached concerning this, but is expected to be in place by the end of the year.

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