Major trading houses Mitsubishi Corp. and Nissho Iwai Corp. have agreed to integrate their steel business operations, industry officials said Wednesday.

The companies are expected to announce the alliance later today. The move will create a business entity with the largest sales in the steel industry, the officials said.

Mitsubishi and Nissho Iwai are likely to spin off their steel operations later this year and integrate them in fall 2002 by establishing a joint steel venture.

Mitsubishi, Japan's second largest trading house, chalked up 1.02 trillion yen in its steel division in fiscal 1999, while fourth-ranked Nissho Iwai posted 1.07 trillion yen. The combined revenues would surpass top-ranked Mitsui & Co.'s 1.4 trillion yen.

Mitsubishi is a leader in the market for steel plates used for automobiles. Nissho Iwai sells specialty steel products and wire rods.

Trading houses are consolidating operations to boost earnings in the steel business in the face of declining revenues due to intensifying competition among steelmakers and cost-cutting by automakers.

Itochu Corp. and Marubeni Corp., for example, are expected to finalize a deal later this month to merge their steel product units.

Nippon Steel alliance

Nippon Steel Corp., the world's second-largest steelmaker, said it has signed an alliance agreement with France's Usinor SA, Europe's largest steelmaker, in the business of steel sheets for use in automobiles.

Under the Global Strategic Alliance Agreement, the two firms will manufacture the steel sheet products they will jointly develop to supply automakers worldwide.

The deal also calls for the two to license each other's manufacturing technology for existing types of steel sheets used in automobiles, the two firms said Tuesday.

The arrangement will enable the two to develop innovative steel sheet products more quickly, they said.

It is hoped the collaboration will allow the companies to adjust to the demands of the globalizing automobile industry, they said.

The two noted that car firms have developed a tendency to demand products of greater rigidity to ensure passenger safety, while also demanding that automakers limit the weight of their products.

Said NSC Vice President Makoto Kihara: "Our thoughts on how to respond to automakers' global strategy of unveiling new motor models simultaneously worldwide were a very important factor" in the formation of the alliance.

The tieup may spur other Japanese steelmakers to strengthen ties with other overseas makers.

Usinor had been negotiating with Kawasaki Steel since last year on an alliance in the automotive steel sheet market, but talks broke down earlier this month over Usinor's proposal to form a joint venture in North America.

The breakdown in the talks led Usinor to seek a new Japanese partner to help it gain a foothold in the Asian market, they said.

Nippon Steel, meanwhile, needs an ally in Europe, in view of the lucrative business prospects in the region where many Japanese automakers have production plants. Toyota Motor Corp. is ready to begin production at a new French plant.

While strengthening its strategy in Europe, Nippon Steel is also boosting its presence in Asia. Last year, it signed a cooperative deal with Pohang Iron & Steel Co. of South Korea, the largest steelmaker in the world.

Usinor Senior Executive Vice President Jean-Louis Ricaud told the same news conference that if Usinor finds a business field where cooperation with Nippon Steel and Pohang could be fruitful, it is prepared to consider engaging in that field.