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2011年2月 5日 (土)


--The Asahi Shimbun, Feb. 4
EDITORIAL: Steel megamerger

A huge merger between two leading Japanese steel makers, which constitute an important part of the nation's industrial base, was announced Thursday. Nippon Steel Corp., the largest Japanese steel manufacturer in terms of crude steel production, and Sumitomo Metal Industries Ltd., the No. 3 player, said they are planning to merge in autumn next year.

If the two companies bring together their competitive technologies and improve the efficiency of production, they will be able to supply steel products of higher quality to manufacturing industries at lower prices. The deal could bolster efforts to revitalize the floundering Japanese economy.

This is not a defensive merger by two companies trying to protect themselves from takeovers or integrating themselves because of poor earnings performances. This is a strategic move for "aggressive investment in the global market," according to Nippon Steel President Shoji Muneoka.

The new steel giant will have a greater ability to meet swelling demand in fast-growing emerging countries through local production and make the large investment needed to develop technologies to fight global warming and enhance competitiveness.

The Anti-Monopoly Law will be the largest obstacle to the proposed megamerger. The outlook of the deal will become murky if the Fair Trade Commission decides to focus on the combined share of the two companies in the domestic market in its antitrust scrutiny of the plan.

Some industry observers say the two steel makers, which formed a capital tie-up eight years ago, have been deterred from moving toward their merger by concerns about whether the deal will receive the green light from the antitrust watchdog.

When Nippon Steel was created through a merger of two steel manufacturers 41 years ago, some of the facilities had to be sold to other companies after the FTC warned that the combination could limit competition in the sector. But the current business environment for steel makers is totally different from the situation four decades ago.

The combined steel production of Nippon Steel and Sumitomo Metal would still be only half of the output of ArcelorMittal, the world's largest steel maker. In terms of size, the combination would not overwhelm South Korea's Pohang Iron and Steel Co. (POSCO), the Japanese companies' main foreign rival in terms of product quality.

More to the point, Japan had just become the second-largest economy in the free world after years of rapid economic growth when Nippon Steel was born. In contrast, the Japanese economy has achieved little nominal growth in the past two decades, and China has overtaken Japan as the world's second-largest economy.

The administration of Prime Minister Naoto Kan is stepping up efforts to conclude free trade agreements. The administration's new push to "open up the nation" has been driven by the drastic change of Japan's status in the world economy.

The number of Japanese companies that consider mergers as a key part of their global strategies will increase in the coming years as competitiveness in the global market has become a major factor for their long-term viability.

In addition to the emergence of behemoths in the world steel market, soaring raw materials prices are another factor that has driven Nippon Steel and Sumitomo Metal into the deal. The international markets for such raw materials as coal and iron ore are now dominated by a small number of resources giants. That means steel makers need to be large if they want to have enough leverage in negotiations over prices with the suppliers of raw materials.

Given these radical changes in the business environment, the FTC should approve the merger between the two firms. The watchdog needs to develop new criteria for its antitrust investigations for the new era and make them clear to other global companies that may be considering similar consolidation moves.

It is also the FTC's important job to ensure that the creation of a new steelmaking titan will not bring disadvantages to the many small and medium-sized manufacturers dependent on the domestic market.


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