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Nippon Steel Corp. and Sumitomo Metal Industries Ltd. said Thursday they plan to set up a panel to iron out the details of a planned merger of their stainless steel operations.

Japan’s largest steelmaker, Nippon Steel, and Sumitomo Metal, the fourth largest, are considering merging their loss-making stainless steel operations under a new company, and plan to introduce cost-cutting measures in a bid to become profitable.

The companies said in a joint statement that they hope to reach a basic agreement on the merger by the end of September.

The panel will be used to negotiate details such as the capital share of the new company, integration of redundant facilities and restructuring of unprofitable sectors.

Nippon Steel and Sumitomo Metal formed a tieup in stainless steel in April 2001.

Nippon Steel’s Yahata steelworks in Kitakyushu currently supplies materials for stainless steel to Sumitomo Metal’s Kashima ironworks in Ibaraki Prefecture.

After the operations are merged, the companies plan to produce stainless steel at both the Yahata and Kashima plants, as well as Nippon Steel’s Hiraki steelworks in Yamaguchi Prefecture.

The stainless steel industry is coming under pressure to reorganize and boost profits due to weak domestic demand and low prices, as well as an increase in the prices of nickel, one of the key raw materials in making stainless steel.

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