Japanese steelmaker JFE Holdings Inc. and heavy machinery manufacturer IHI Corp. said on Tuesday they are in discussions for a possible merger of their shipbuilding operations in the face of intensifying competition from their Korean and Chinese rivals and rising global demand.
JFE and IHI will negotiate the merger ratio for their shipbuilding divisions, JFE's Universal Shipbuilding Corp. and IHI's IHI Marine United Inc., and will jointly study how to form the most effective structure for production, they said in a joint statement.
The two Japanese companies also agreed on the need to review their capital spending plans and the mix of ship types in order to cope with increasingly fierce global competition.
'Conditions surrounding the shipbuilding industry do not permit optimism, given the uncertain outlook for foreign exchange rates and the procurement of materials,' while the aggressive expansion of capital spending and orders by South Korean and Chinese rivals is likely to fuel global competition further, JFE and IHI said.
The merger of Universal Shipbuilding and IHI Marine would create a company with combined sales of 345 billion yen ($3.37 billion) and a shipbuilding capacity of some 3 million tons, surpassing those of Japan's largest shipbuilder, Imabari Shipbuilding Co., in both categories, according to the Nikkei business daily.
JFE and IHI will negotiate the merger ratio for their shipbuilding divisions, JFE's Universal Shipbuilding Corp. and IHI's IHI Marine United Inc., and will jointly study how to form the most effective structure for production, they said in a joint statement.
The two Japanese companies also agreed on the need to review their capital spending plans and the mix of ship types in order to cope with increasingly fierce global competition.
'Conditions surrounding the shipbuilding industry do not permit optimism, given the uncertain outlook for foreign exchange rates and the procurement of materials,' while the aggressive expansion of capital spending and orders by South Korean and Chinese rivals is likely to fuel global competition further, JFE and IHI said.
The merger of Universal Shipbuilding and IHI Marine would create a company with combined sales of 345 billion yen ($3.37 billion) and a shipbuilding capacity of some 3 million tons, surpassing those of Japan's largest shipbuilder, Imabari Shipbuilding Co., in both categories, according to the Nikkei business daily.