Major traders Mitsui, Sumitomo eye alliance

Trading houses Mitsui & Co. and Sumitomo Corp. have agreed on a wide-ranging business tieup that includes integrating their sales of construction materials and steam coal, a Mitsui spokesman said Tuesday.

The alliance also calls on Mitsui to join Sumitomo's online sales of tools and other goods and materials for plants by taking a roughly 20 percent stake in a joint venture Sumitomo has launched with U.S. distribution giant W.W. Grainger Inc., he said.

The April 1 launch of Sumitomo Mitsui Banking Corp., the result of a merger of Sakura Bank and Sumitomo Bank, is behind the alliance between the two trading firms, industry analysts said.

The latest deal follows an agreement between Mitsui Chemicals Inc. and Sumitomo Chemical Co. to create a joint holding company in October 2003.

"The planned integration of our businesses aims to improve efficiency of the two firms' operations in order to boost our profits," the Mitsui spokesman said.

"We will consider further alliances in various fields with trading firms other than Sumitomo in the future."

In the construction materials field, the two have reached a basic agreement to merge their wholly owned subsidiaries involved in construction materials by the end of this year, the spokesman said.

This will create one of the nation's largest trading houses specializing in construction materials, with annual sales of some 340 billion yen, he said.

Mitsui and Sumitomo will also combine their marketing of steam coal used as fuel at factories, with Sumitomo transferring its business to a Mitsui subsidiary and taking an equity stake of some 30 percent in the company, he said.

The Mitsui-Sumitomo alliance is expected to spur an industry realignment as major Japanese trading houses grapple to enhance efficiency in their businesses to survive, the analysts said.

The two firms remain cautious about integrating their large-scale businesses, such as in steel, according to officials at the two trading houses.