Nippon and SMI deny capital alliance

Nippon and SMI deny capital alliance

Japan's largest steel producer Nippon Steel Corp. and fourth largest steel company Sumitomo Metal Industries Ltd., previously announced that they were considering an extensive collaboration in production, logistics and procurement but not a capital alliance. Despite this announcement, recently there were news regarding a possible capital tie up of these two companies. However Sumitomo Metal Industries Ltd. expressed that they have not requested any capital injection or tie up from Nippon Steel Corp. Two companies have merged their welding material subsidiaries and also are planning to merge their stainless steel operations in April 2003. Furthermore, they have ties with Kobe Steel Ltd. which raised speculations on a possible alliance of three companies. These assumptions arise from the merger of Kawasaki Steel Corp. and NKK Corp. to form JFE Holdings Inc., aiming to bring down costs via forming synergies. Weak demand in Japan combined with the competition with Asian producers force Japanese steelmakers into such alliances.