On Tuesday, a plan to merger was announced by Nisshin Steel and Nippon Metal Industry for a deal that would create the second-largest maker of stainless steel in Japan.

With combined market capitalization of $1.6 billion, the two companies are expecting to complete the merger by October 2012. A stand-alone value of $1.4 billion is possessed by Nisshin, which already owns a 5 percent stake in Nippon Metal.

Without providing any specifics on the merger, the firms said they planned to create a holding company for the newly combined business.

The announcement comes as both firms face growing competition from international rivals and weak demand in their domestic market.

Nisshin Steel said in a statement: “The business environment of stainless steel industry has been going through drastic changes in recent years. The companies believe that it is indispensable for them to further tighten their relationship.”