Nippon Steel Corp. and Sumitomo Metal Industries Ltd.'s deal to create the world's No. 2 steelmaker may shave as much as ¥100 billion off costs as the companies consolidate operations, according to analysts.
"The integration will create an added cost savings of ¥100 billion over the next three years," said Toshiyuki Johno, a Tokyo-based analyst at Citigroup Inc, adding it may generate ¥2,000 for every metric ton of crude steel produced, based on estimated combined annual output of about 50 million tons.
The deal, which will combine Japan's largest and third-biggest mills, is aimed at gaining leverage over raw material purchasing and prices as costs soar. The likely cost savings compare with about ¥1,600 per ton of steel created from Mittal's takeover of Arcelor in 2006 to create ArcelorMittal, Nomura Securities Co. said.
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