JFE mulling takeover of Hitachi Zosen

JFE Holdings Inc. is considering taking over Hitachi Zosen?s stake in Universal Shipbuilding Corp., a joint venture between the two firms. The deal would mark Osaka-based Hitachi Zosen’s effective departure from shipbuilding and it will instead concentrate on its mainline environment equipment and plants business to try to bolster profitability.

The acquisition is expected to accelerate reconfiguration of the domestic shipbuilding industry. Although demand for shipbuilding has increased, Japanese shipbuilders face cutthroat competition with South Korean and Chinese rivals as well as deteriorating profitability due to rising materials costs.

JFE Holdings was created in 2002 through a merger of NKK Corp. and Kawasaki Steel Corp. NKK and Hitachi Zosen set up their 50-50 joint venture Universal Shipbuilding in 2002 by integrating their shipbuilding operations. By turning Universal Shipbuilding into a subsidiary, JFE Holdings plans to beef up partnerships with group engineering and steel companies to pare down production costs.

Hitachi Zosen has downsized its shipbuilding business and, in February, it cut its 53% of its stake in Naikai Zosen Corp., based in Onomichi, to 20% by selling a portion of its holdings to an investment firm. Universal Shipbuilding is Japan’s second-largest shipbuilder after Imabari Shipbuilding Co.