Nippon Steel Corp. and Posco, Asia's two biggest steelmakers, may expand an alliance as producers rush to bolster their defenses against hostile takeover bids after Mittal Steel Co bought Arcelor SA.
"We're considering details of how we can cooperate with Posco in order to further strengthen the competitiveness of both companies," Masato Suzuki, spokesman for Tokyo-based Nippon Steel, said yesterday.
"We are discussing how to reinforce each other's alliance," said Lee Sang-chun, a spokesman at South Korea's Posco.
The two companies already hold shares in one another. They agreed on a five-year tie-up in 2000 and extended that accord last year. This year's takeover by Rotterdam-based Mittal, the world's largest steelmaker, of its nearest rival has triggered firms from India to Tai-wan to take measures to deter bids. Japanese producers helped Posco set up its first furnace in the 1960s.
"Both companies are concerned about being taken over by Mittal and want to defend themselves," said Cindy Park, a Seoul-based analyst at Nomura Securities Co. "They also want to fight against Chinese steelmakers, who are increasingly becoming a threat. That is the operational aspect."
Spokesmen for the two companies were not specific yesterday on how Posco and Nippon Steel may enhance their tie-up. Nippon Steel, valued at ¥3.46 trillion (US$29.9 billion) has 3.3 percent of Posco, while Posco, worth 20.9 trillion won (US$21.8 billion), has 2.17 percent of Nippon's shares.
Nippon Steel also has cross-shareholdings with domestic rivals Sumitomo Metal Industries Ltd and Kobe Steel Ltd. Those three Japanese companies said in March -- two months after Mittal first bid for Arcelor -- that they were studying "countermeasures" to repel any unwelcome suitors.
The Nihon Keizai Shimbun said yesterday that Posco and Nippon Steel will each spend several tens of billions of yen to buy more shares in each other, citing executives it didn't identify. They will also supply each other with semi-finished products called slabs, the report said.
Hiroshi Nakashima of Nippon Steel said the company couldn't comment on whether the cross-shareholdings would be extended.
"Nothing has been determined yet," Posco spokesman Lee said.
Lakshmi Mittal, the world's fifth-richest man who's Mittal Steel's chairman, has made it clear that he wants to expand the company in Asia, home to the two fastest-growing major economies.
"We are focusing on India and China," Mittal said on July 7 in Bhubaneswar, India. "India is a very important milestone for us to remain the biggest company in the global steel industry."
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