Nippon Steel, Posco Eye Expansion Of Partnership

Nippon Steel and Posco, the world's second- and third-largest steelmakers by output, have set up project teams and started discussing measures to bolster their alliance, the Japanese firm said. "It is true that we are considering concrete measures but nothing has been decided," the company said in a statement.

The Nihon Keizai Shimbun said the two companies were considering co-developing mines in Australia and other areas as early as 2007, in addition to cooperating in transporting raw materials such as iron ore. They were also discussing strengthening their capital ties, the Japanese business daily said.

Currently, Nippon Steel has a stake of just over 3% in Posco while the South Korean company owns slightly more than 2% of its Japanese counterpart. Both are expected to raise their respective stakes by about one to two percentage points.

Nippon Steel and Posco forged a partnership based on a cross-shareholding arrangement in 2000 but cooperation has been limited mostly to such areas as personnel exchanges and research in environmental technologies.

"This is part of their joint effort to counter a potential threat to take them over," said Hideki Ito, a steel analyst at SMBC Friend Securities. The global reshuffle in the steelmaking industry shifted into high gear earlier this year when Mittal Steel of the Netherlands, the world's largest steelmaker, purchased Arcelor SA of Luxembourg.

"The Asian market is expected to be the next stage of the global reorganization of the industry as Mittal is likely to target Asian steelmakers, especially Japanese firms," Ito said. "Therefore, companies in the region are urged to continue taking necessary measures against a takeover risk." he said.

Nippon Steel intends to continue its tie-up with Mittal in producing automotive steel sheet in the U.S. but it will join hands with Posco in the Asian market to better compete with U.S. and European steelmakers, the Nihon Keizai said.

Copyright Agence France-Presse, 2006

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