Two major Japanese conglomerates announced a deal to create one of the country's biggest shipbuilders Monday as the industry faces increasingly tough competition.

Ships and containers at a wharf in the Tokyo Port in 2011. Two major Japanese conglomerates announced a deal to create one of the country's biggest shipbuilders Monday as the industry faces increasingly tough competition. , Photo: AFP

Heavy machinery giant IHI and steelmaker JFE Holdings will merge their shipbuilding units IHI Marine United Inc. and Universal Shipbuilding Corporation, they said in a joint statement. Universal will become the surviving entity.

Shipbuilding was once one of the drivers of Japan's post-War economic miracle, but in recent years the industry has been overtaken by those of other Asian countries.

The two firms said their business integration was "necessary in order to conquer fierce competition with South Korean and Chinese shipbuilders in the severe business environment".

As well as the slowdown in the world economy, Japanese exporters face the challenge of the strong yen making their products more expensive to overseas buyers.

The two sides hope to sign an official agreement by August 31, ahead of their annual shareholders' meetings by the end of September.

The new company will be one of Japan's biggest shipbuilders and IHI and JFE will each have 45.93 percent of it, with the remaining 8.15 percent owned by Hitachi Zosen, which currently holds 15.07 percent of Universal.

The new firm will continue to use the two firms' current factories with no plan to reduce their workforce, the statement said.

Source: AFP