Nippon Steel, Japan’s largest steelmaker, is considering a merger with domestic rival Sumitomo Metal Industries next year in a move that would create the world’s second-largest steel company by output.

The deal would rank the new company as the world’s second-largest steel producer after ArcelorMittal.

The new company would have a production capacity of more than 50Mt/y of crude steel. This would be some way behind ArcelorMittal with about 100Mt/y but ahead of Japan's other major steelmaker, JFE which has 34Mt/y.

The two companies already hold minority stakes in each other. Since 2002, they have also had an alliance in the semi-finished steel products business.

In a press release, the companies said the merger would enable them to become more competitive in areas such as developing new products and technology in the energy and environment-related sectors, in addition to helping them cut costs and meet rising demand for steel in emerging markets.