Nippon Steel Corp. and Sumitomo Metal Industries Ltd. announced Thursday that they have agreed to merge on Oct. 1 next year under the ratio of 0.735 Nippon Steel share to one Sumitomo Metal share, with the new entity to be named Nippon Steel & Sumitomo Metal Corp.

Through the merger that will create the world's second-largest steelmaker by output, the companies said they aim to eventually achieve production capacity of 60 million to 70 million tons by expanding overseas business and realizing synergies of about 150 billion yen per year around three years after integration.

"By concentrating the world's top-level people, goods and resources, we will be able to carry out (overseas operations) far faster in far wider areas, far more efficiently," said Nippon Steel President Shoji Muneoka at a joint press conference held in Tokyo.

"The integration will be a big task, but we hope to finalize it thoroughly," said Sumitomo Metal Industries President Hiroshi Tomono.

Tomono said, "At this moment, there are no plans to merge or close down domestic steel mills" and indicated a position against cutting jobs in Japan.

Nippon Steel, the top Japanese steelmaker, will be the surviving company, and Sumitomo Metal is expected to be delisted ahead of the merger.

The two companies began merger talks in February and the Japan Fair Trade Commission is in the process of assessing the merger application they submitted at the end of May.

The Japanese steelmakers also plan to submit merger applications to the competition watchdogs of around 10 countries, including China, South Korea and the United States, a process necessary for carrying out overseas operations.

By merging their operations, the companies are aiming to strengthen their global competitiveness at a time when Chinese steelmakers, their main Asian rivals, are expanding through a series of mergers.

Noting that an integration panel was set up in April, Muneoka said, "We've come this far in merely six months as we were driven by a sense of danger" regarding changes in the business environment surrounding the steel industry.

In order to address the changes, including the recent sharp appreciation of the yen, Nippon Steel and Sumitomo Metal said they would speed up the examination of specific integration measures.

Once established, the new company will hold a 3 percent share of global crude steel production, placing it just behind top producer Arcelor Mittal of Luxembourg, which holds a share of more than 6 percent.