OREANDA-NEWS. Nippon Steel Trading Co. and Sumikin Bussan Corp. announced that they will merge on Oct. 1.

Nippon Steel & Sumitomo Metal Corp. (5401), formed last October through the merger of Nippon Steel Corp. and Sumitomo Metal Industries Ltd., is the top shareholder in each company with a stake of more than 30%.

The two companies' combined group sales for last fiscal year totaled 1.89 trillion yen. Their steel divisions' sales would rival those of third-place steel trading firm Marubeni-Itochu Steel Inc. A joint committee headed by the presidents of both companies will discuss the merger ratio, as well as who will sit on the board.

The steel business would account for 70% of sales at the new company. Nippon Steel Trading has steel business hubs in Russia and Indonesia, and Sumikin has bases in Mexico and India, where Japanese automobile industry has made major inroads. The plan is to effectively use both companies' hubs to expand profits.

The supply-demand balance has worsened in the global market for steel products due to increased output from major Chinese companies. Because steel product prices are also expected to decline, both companies determined that it was necessary to strengthen their finances through a merger.