Nippon Metal and Nisshin stainless steel bar production post merger

    Overseas, competition with giant steelmakers is intensifying.

    Given rising imports in the stainless steel  bar sector, Nisshin Steel president Mr Toshinori Miki said that "we must beat these in terms of quality and cost."under their merger scheduled for October 2011, Nisshin Steel Co and Nippon Metal Industry Co will concentrate upstream stainless steel production at the former's steelworks to improve manufacturing efficiency.

    In fiscal 2010, the steelmakers had a combined pretax profit of JPY 18.8 billion. The integration is expected to boost annual profit by JPY 13 billion on a pretax basis by fiscal 2016.

    The duo, which each has one steelmaking facility, will consolidate production at Nisshin Steel's Shunan Works in Yamaguchi Prefecture, with Nippon Metal's Kinuura mill to discontinue such operations. Both facilities have been operating for more than 40 years and upgrading them had been an issue. Excess personnel will be absorbed via transfers and other measures.

    However, market conditions for stainless steel bar are tough at home and abroad. Prices for nickel, one of the key raw materials, are volatile in part due to speculation. When prices of the metal rise, manufacturers tend to be slow to pass the added cost on to products. And when nickel prices slide, customers refrain from placing orders in anticipation of lower prices. Companies are also susceptible to inventory losses, with both Nisshin Steel and Nippon Metal on course for net losses for the first time in two years in fiscal 2011.

    Nisshin Steel will be responsible for marketing, while Nippon Metal will focus on hot rolling processes at the Kinuura works.

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