This week, two more Global 5000 companies announced they were merging … Nippon Steel and Sumitomo Metal Industries.  Just watching The Global 5000 companies on a regular basis we see mergers and combinations on a regular basis.

This one feels different.

It is not often we see large, Japanese companies (outside the financial sector) merge. Plus this is not an industry like media or technology where technology has severely altered the landscape. The steel industry went thru a transformation years ago. The largest manufacturers are in India, China and Japan.  And the industry is showing relatively stable year on year growth — not on a fast path.

Add in the aspect which is the operating costs and price of doing business in Japan vs China.  China can produce steel at prices below Japan putting pressure on those manufacturers. Put the slow growth, changing market conditions and cheaper prices all together and you have the drivers behind the market action.