Kobe Steel May Seek Domestic Partner for Aluminum, Copper

Kobe Steel Ltd. (5406), Japan’s fourth- largest steelmaker, said it is keen to combine its aluminum and copper operations with other Japanese suppliers of the metals to reduce costs and negotiate better product prices.

The steelmaker will consider a merger should it find a “good” partner, President Hiroshi Sato said today at a New Year gathering held by the Japan Iron and Steel Federation. Kobe Steel is currently not in discussions with any potential partner, he said.

Profit (5406) from Kobe Steel’s aluminum and copper business will probably slide 32 percent to 10 billion yen ($130 million) in the year ending March 31, the company said Oct. 31. The division accounts for about 16 percent of total sales, while steel makes up 45 percent.

Domestic metal producers may enter into mergers or alliances after Nippon Steel Corp. (5401) obtained approval from the Japan Fair Trade Commission last month to take over Sumitomo Metal Industries Ltd. (5405), Sato said. The creation of the world’s second-biggest steel mill is in line with government efforts to encourage takeovers to spur growth in the third-largest economy.

Japanese companies must “seriously consider” taking measures, including merging their operations, to compete globally as a stronger yen cuts into sales, Nippon Steel Chairman Akio Mimura said Dec. 15.

Kobe Steel’s Sato said he expects the yen to trade between 78 and 82 to the dollar this year. The currency, which climbed to a postwar high Oct. 31, has eroded the competitiveness of Japanese-made products overseas. The yen was at 76.8 to the dollar as of 5:08 p.m. in Tokyo.

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net.

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