JFE Holdings Inc.'s shipbuilding unit, the nation's second-largest by output, said plunging demand will force it to prolong its evaluation of the merger planned with IHI Corp., 19 months after the tieup was proposed.
"We'd like to complete an assessment of the shipbuilding integration as soon as possible," Shinjiro Mishima, chief executive officer of the Kawasaki-based unit, Universal Shipbuilding Corp., said. "But if we make the assessment too quickly we could also overlook a risk" of holding excess capacity when there isn't enough demand.
JFE and IHI started talks in April 2008 to combine their shipbuilding units to counter competition from Asian rivals. The financial crisis has since dried up demand for new ships, with orders at Japanese yards falling 75 percent this year. Global shipbuilders are set to deliver vessels equivalent to about 40 percent of the shipping fleet currently in operation, based on order books, according to the transport ministry.