Japan’s largest steel producer, Nippon Steel, and Sumitomo Metal Industries are to merge next year, in a move that The Gas Review (TGR) claims is ‘certain to impact the industrial gas industry’.

The two companies made the announcement on 3rd February and will commence consideration of the integration of their businesses to take place from 1st October 2012.

If accomplished, the deal would represent the latest major merger to take place following the merger of NKK and Kawasaki Steel in 2002, creating JFE Holdings.

This new move by Nippon Steel and Sumitomo Metal Industries is born out of the two companies’ aim to improve their competitive edge in the global market, where the demand for steel is expanding and especially so among the so-called emerging nations.

It is also a move that builds on the existing relations between the two entities; in 2002 the two companies established Nippon Steel & Sumikin Welding to handle the manufacture and marketing of welding materials. In addition, in 2003 they established Nippon Steel & Sumikin Stainless Steel, clearly merging their respective stainless steel enterprises.

So what will this mean for the industrial gases business in Japan?

Steel producers with integrated blast furnace steel mills are the largest owners of cryogenic air separation units and are also the largest consumers of oxygen, nitrogen and argon separated gases. At the same time, the cryogenic air separation plants at the mills liquefy some of this gas and function as a source by selling it on the open market.

Some of Nippon Steel’s sites and joint ventures with industrial gas producers are supplied with gases via on-site facilities, while at other sites the company operates its own ASUs and handles supply itself. For Sumitomo Metal Industries, however, the company has its own integrated steel mills whereby Air Water takes care of the supply of gases through its own on-site facilities.

With the merger ahead, it is thought that this will have some impact on the production and supply of industrial gases. Quite how exactly the merger of the two companies will affect the industrial gas business in the region remains to be seen, but as TGR explains, the situation will be ‘closely watched’.