Nippon Steel Corp. and Sumitomo Metal Industries Ltd., Japan's biggest and fourth-largest steelmakers, officially announced Wednesday their intentions to begin negotiations on a business alliance that would slash production, distribution and material-procurement costs.
The statement follows an announcement by Sumitomo Metal on Tuesday that it will study ways to reinforce its tieup with Nippon Steel as they already have business ties in the stainless steel and building materials fields.
The two firms will work out details of the alliance in a bid to reach a final agreement by the end of January, company officials said.
The alliance would call on Sumitomo Metal to supply semifinished steel products to Nippon Steel, the companies said in a statement. The two steelmakers said they will also study ways of bolstering each other's corporate strength by deepening ties among their group firms and business collaboration in wide-flange beams, a field where the two firms have cooperated in distribution.
The deal could realign Japan's steel industry into two groups -- a tripartite partnership of Sumitomo Metal, Nippon Steel, and Kobe Steel Ltd. and a two-way alliance between NKK Corp. and Kawasaki Steel Corp., which plan to integrate operations next fall.